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How Demand Information Can Destabilize a Cartel

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This paper studies a symmetric Bertrand duopoly with imperfect mon- itoring where rms receive noisy public signals about the state of demand. These signals have two opposite e ects on the incentive to collude: avoid- ing punishment after a low-demand period increases collusive pro ts, mak- ing collusion more attractive, but it also softens the threat of punishment, which increases the temptation to undercut the rival. There are cases where the latter e ect dominates, and so the collusive equilibrium does not always exist when it does absent demand information. These ndings are related to the Sugar Institute Case studied by Genesove and Mullin (2001).

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0803.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0803.

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Date of creation: Feb 2008
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Handle: RePEc:vie:viennp:0803

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Web page: http://www.univie.ac.at/vwl

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  1. Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers 523, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Nilsson, Arvid, 1999. "Transparency and Competition," Working Paper Series in Economics and Finance 298, Stockholm School of Economics, revised 29 Nov 1999.
  3. Cason, Timothy N & Mason, Charles F, 1999. "Information Sharing and Tacit Collusion in Laboratory Duopoly Markets," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 258-81, April.
  4. H. Peter Møllgaard & Per Baltzer Overgaard, 1999. "Market Transparency: A Mixed Blessing?," CIE Discussion Papers 1999-15, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Feb 2000.
  5. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
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  7. Svend Albæk & Peter Møllgaard & Per Baltzer Overgaard, 1997. "Government-Assisted Oligopoly Coordination? A Concrete Case," CIE Discussion Papers 1997-03, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  8. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
  9. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
  10. Genesove, David & Mullin, Wallace P, 2001. "Rules, Communication and Collusion: Narrative Evidence from the Sugar Institute Case," CEPR Discussion Papers 2739, C.E.P.R. Discussion Papers.
  11. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
  12. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
  13. Andrea Amelio & Sara Biancini, 2010. "ALTERNATING MONOPOLY AND TACIT COLLUSION -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 402-423, 06.
  14. Fuller, Stephen W. & Ruppel, Fred J. & Bessler, David A., 1990. "Effect Of Contract Disclosure On Price: Railroad Grain Contracting In The Plains," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(02), December.
  15. Olivier Compte, 1998. "Communication in Repeated Games with Imperfect Private Monitoring," Econometrica, Econometric Society, vol. 66(3), pages 597-626, May.
  16. Natalia Fabra, 2003. "Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 271-293, 09.
  17. Connor, John M., 1998. "Lysine: A Case Study in International Price-Fixing," Choices, Agricultural and Applied Economics Association, vol. 13(3).
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