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Market Transparency: A Mixed Blessing?

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Author Info
H. Peter Møllgaard (Copenhagen Business School)
Per Baltzer Overgaard (University of Aarhus)

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Abstract

Antitrust practitioners and consumers protectionists often argue that market transparency should be improved to allow consumers to shop around for bargain prices thereby putting pressure on oligopolists´ pricing. We model how transparency, interpreted as the comparability from the point of view of consumers of the characteristics of goods and services, affects the outcome of a repeated oligopoly. Improved transparency may make consumers switch suppliers more easily. This increases the static temptation of individual firms to deviate from tacitly agreed prices, but at the same time the future punishment may become more severe. When the number of firms is small, the "optimal degree of transparency" may not be perfect transparency, unless the oligopolists may rely on sophisticated, optimal punishment strategies. When the number of firms grows larger, the optimal degree of transparency increases, and from some point onward perfect transparency is optimal. We discuss the various policy implications of these results.

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File URL: http://www.econ.ku.dk/CIE/Discussion%20Papers/1999/Pdf%20files/9915.pdf
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Publisher Info
Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1999-15.

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Length: 32 pages
Date of creation: Jul 1999
Date of revision: Feb 2000
Handle: RePEc:kud:kuieci:1999-15

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Related research
Keywords: market transparency; customer switching; repeated oligopoly;

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Find related papers by JEL classification:
D18 - Microeconomics - - Household Behavior - - - Consumer Protection
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  4. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June. [Downloadable!] (restricted)
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  7. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May. [Downloadable!] (restricted)
  8. Albaek, Svend & Mollgaard, Peter & Overgaard, Per B, 1997. "Government-Assisted Oligopoly Coordination? A Concrete Case," Journal of Industrial Economics, Blackwell Publishing, vol. 45(4), pages 429-43, December. [Downloadable!] (restricted)
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  9. Lambertini, Luca, 1997. "Prisoners' Dilemma in Duopoly (Super)Games," Journal of Economic Theory, Elsevier, vol. 77(1), pages 181-191, November. [Downloadable!] (restricted)
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  10. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
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  16. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June. [Downloadable!] (restricted)
  17. Albaek, Svend & Lambertini, Luca, 1998. "Collusion in differentiated duopolies revisited," Economics Letters, Elsevier, vol. 59(3), pages 305-308, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Møllgaard, Peter, 2002. "Must Trust Bust?," Working Papers 02-2002, Copenhagen Business School, Department of Economics. [Downloadable!]
  2. Rune Stenbacka, 2002. "Microeconomic Policies in the New Economy," Finnish Economic Papers, Finnish Economic Association, vol. 15(2), pages 59-75, Autumn. [Downloadable!]
  3. Liliane Karlinger, 2008. "How Demand Information Can Destabilize a Cartel," Vienna Economics Papers 0803, University of Vienna, Department of Economics. [Downloadable!]
  4. Per Baltzer Overgaard & H. Peter Møllgaard, 2007. "Information Exchange, Market Transparency and Dynamic Oligopoly," Economics Working Papers 2007-03, School of Economics and Management, University of Aarhus. [Downloadable!]
    Other versions:
  5. Christian Schultz, 2002. "Transparency and Tacit Collusion in a Differentiated Market," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Michele Grillo, 2002. "Collusion and Facilitating Practices: A New Perspective in Antitrust Analysis," European Journal of Law and Economics, Springer, vol. 14(2), pages 151-169, September. [Downloadable!] (restricted)
  7. Lommerud, Kjell Erik & Sørgard, Lars, 2002. "Entry in Telecommunication: Customer Loyalty, Price Sensitivity and Access Prices," CEPR Discussion Papers 3502, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Boone, J. & Potters, J., 2002. "Transparency, prices, and welfare with imperfect substitutes," Discussion Paper 7, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  9. Morten Hviid & H. Peter Møllgaard, 2000. "Countervailing Power and Price Transparency," CIE Discussion Papers 2000-01, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
    Other versions:
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