IDEAS home Printed from https://ideas.repec.org/p/jhu/papers/555.html
   My bibliography  Save this paper

Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices

Author

Listed:
  • Joseph E. Harrington, Jr.
  • Andrzej Skrzypacz

Abstract

Motivated by recent cartel practices, a stable collusive agreement is characterized when firms' prices and quantities are private information. Conditions are derived whereby an equilibrium exists in which firms truthfully report their sales and then make transfers within the cartel based on these reports. The properties of this equilibrium fit well with the cartel agreements used in a number of markets including citric acid, lysine, and vitamins.

Suggested Citation

  • Joseph E. Harrington, Jr. & Andrzej Skrzypacz, 2009. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," Economics Working Paper Archive 555, The Johns Hopkins University,Department of Economics.
  • Handle: RePEc:jhu:papers:555
    as

    Download full text from publisher

    File URL: http://www.econ2.jhu.edu/REPEC/papers/wp555.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Johannes Hörner & Wojciech Olszewski, 2006. "The Folk Theorem for Games with Private Almost-Perfect Monitoring," Econometrica, Econometric Society, vol. 74(6), pages 1499-1544, November.
    2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    3. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
    4. William Fuchs, 2007. "Contracting with Repeated Moral Hazard and Private Evaluations," American Economic Review, American Economic Association, vol. 97(4), pages 1432-1448, September.
    5. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
    6. Abreu, Dilip & Milgrom, Paul & Pearce, David, 1991. "Information and Timing in Repeated Partnerships," Econometrica, Econometric Society, vol. 59(6), pages 1713-1733, November.
    7. Aoyagi, Masaki, 2002. "Collusion in Dynamic Bertrand Oligopoly with Correlated Private Signals and Communication," Journal of Economic Theory, Elsevier, vol. 102(1), pages 229-248, January.
    8. Obara, Ichiro, 2009. "Folk theorem with communication," Journal of Economic Theory, Elsevier, vol. 144(1), pages 120-134, January.
    9. Kandori, Michihiro, 2002. "Introduction to Repeated Games with Private Monitoring," Journal of Economic Theory, Elsevier, vol. 102(1), pages 1-15, January.
    10. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-1239, December.
    11. Levenstein, Margaret & Suslow, Valerie Y. & Oswald, Lynda J., 2003. "Contemporary International Cartels And Developing Countries: Economic Effects And Implications For Competition Policy," Working Papers 14590, International Agricultural Trade Research Consortium.
    12. Olivier Compte, 1998. "Communication in Repeated Games with Imperfect Private Monitoring," Econometrica, Econometric Society, vol. 66(3), pages 597-626, May.
    13. Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
    14. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
    15. Zheng, Bingyong, 2008. "Approximate efficiency in repeated games with correlated private signals," Games and Economic Behavior, Elsevier, vol. 63(1), pages 406-416, May.
    16. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. , H. & ,, 2016. "Approximate efficiency in repeated games with side-payments and correlated signals," Theoretical Economics, Econometric Society, vol. 11(1), January.
    2. David Spector, 2017. "Cheap talk, monitoring and collusion," Working Papers hal-01975642, HAL.
    3. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(2), pages 193-216, March.
    4. David Spector, 2015. "Facilitating collusion by exchanging non-verifiable sales reports," Working Papers halshs-01119959, HAL.
    5. Joseph E. Harrington, Jr. & Wei Zhao, 2012. "Signaling and Tacit Collusion in an Infinitely Repeated Prisoners' Dilemma," Economics Working Paper Archive 587, The Johns Hopkins University,Department of Economics.
    6. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Post-Print halshs-03760756, HAL.
    7. Chan, Jimmy & Zhang, Wenzhang, 2015. "Collusion enforcement with private information and private monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 188-211.
    8. Fong, Kyna & Sannikov, Yuliy, 2007. "Efficiency in a Repeated Prisoners' Dilemma with Imperfect Private Monitoring," Department of Economics, Working Paper Series qt8vz4q9tr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    9. Harrington, Joseph E. & Zhao, Wei, 2012. "Signaling and tacit collusion in an infinitely repeated Prisoners’ Dilemma," Mathematical Social Sciences, Elsevier, vol. 64(3), pages 277-289.
    10. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," PSE-Ecole d'économie de Paris (Postprint) halshs-03760756, HAL.
    11. David Spector, 2015. "Facilitating collusion by exchanging non-verifiable sales reports," PSE Working Papers halshs-01119959, HAL.
    12. Yamamoto, Yuichi, 2009. "A limit characterization of belief-free equilibrium payoffs in repeated games," Journal of Economic Theory, Elsevier, vol. 144(2), pages 802-824, March.
    13. Joseph E. Harrington, Jr. & Wei Zhao, 2010. "Signaling and Tacit Collusion in an Infinitely Repeated Prisoners' Dilemma," Economics Working Paper Archive 559, The Johns Hopkins University,Department of Economics.
    14. Yu Awaya & Vijay Krishna, 2016. "On Communication and Collusion," American Economic Review, American Economic Association, vol. 106(2), pages 285-315, February.
    15. Ashkenazi-Golan, Galit & Lehrer, Ehud, 2019. "What you get is what you see: Cooperation in repeated games with observable payoffs," Journal of Economic Theory, Elsevier, vol. 181(C), pages 197-237.
    16. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    17. Yamamoto, Yuichi, 2012. "Characterizing belief-free review-strategy equilibrium payoffs under conditional independence," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1998-2027.
    18. Lucas Maestri, 2012. "Bonus Payments versus Efficiency Wages in the Repeated Principal-Agent Model with Subjective Evaluations," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 34-56, August.
    19. Laclau, M., 2014. "Communication in repeated network games with imperfect monitoring," Games and Economic Behavior, Elsevier, vol. 87(C), pages 136-160.
    20. Michihiro Kandori, 2011. "Weakly Belief‐Free Equilibria in Repeated Games With Private Monitoring," Econometrica, Econometric Society, vol. 79(3), pages 877-892, May.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jhu:papers:555. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Humphrey Muturi (email available below). General contact details of provider: https://edirc.repec.org/data/dejhuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.