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Collusion through Coordination of Announcements

Author

Listed:
  • Joseph E. Harrington
  • Lixin Ye

Abstract

A theory is developed to explain how sellers can effectively collude by coordinating on list prices (or surcharges), while leaving sellers to set their final prices. List prices are interpreted to be cheap talk announcements about cost information unknown to buyers. Buyers use those announcements to decide whom to invite to their procurement auction and the reserve price to set. By coordinating on a high list price to signal high cost, sellers produce supracompetitive prices by inducing buyers to be less aggressive, as reflected in a higher reserve price. We show that collusion can raise social welfare.

Suggested Citation

  • Joseph E. Harrington & Lixin Ye, 2019. "Collusion through Coordination of Announcements," Journal of Industrial Economics, Wiley Blackwell, vol. 67(2), pages 209-241, June.
    • Handle: RePEc:bla:jindec:v:67:y:2019:i:2:p:209-241
    DOI: 10.1111/joie.12199
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    Cited by:

    1. Harrington, Joseph E., 2022. "The Anticompetitiveness of a Private Information Exchange of Prices," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    2. Haan, Marco A. & Heijnen, Pim & Obradovits, Martin, 2023. "Competition with list prices," Games and Economic Behavior, Elsevier, vol. 140(C), pages 502-528.
    3. Janssen, Maarten & Reshidi, Edona, 2022. "Regulating recommended retail prices," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    4. Neven, Damien & Piccolo, Salvatore & Andreu, Enrique, 2021. "Price Authority and Information Sharing with Competing Principals," CEPR Discussion Papers 16753, C.E.P.R. Discussion Papers.
    5. Jorge Lemus & Fernando Luco, 2021. "Price Leadership and Uncertainty About Future Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 69(2), pages 305-337, June.
    6. Andreu, Enrique & Neven, Damien & Piccolo, Salvatore, 2023. "Price authority and information sharing with competing supply chains," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    7. van Damme, Eric, 2023. "The beauty and the beast : Het spel en de knikkers," Other publications TiSEM dfd3c8df-e740-48f0-962b-e, Tilburg University, School of Economics and Management.
    8. Willem H. Boshoff & Johannes Paha, 2021. "List Price Collusion," Journal of Industry, Competition and Trade, Springer, vol. 21(3), pages 393-409, September.

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