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Collusion with intertemporal price dispersion

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  • Nicolas de Roos
  • Vladimir Smirnov

Abstract

We develop a theory of optimal collusive intertemporal price dispersion. Dispersion clouds consumer price awareness, encouraging firms to coordinate on dispersed prices. Our theory generates a collusive rationale for price cycles and sales. Patient firms can support optimal collusion at the monopoly price. For less patient firms, monopoly prices must be punctuated with fleeting sales. The most robust structure involves price cycles that resemble Edgeworth cycles. Low consumer attentiveness enhances the effectiveness of price dispersion by reducing the payoff to deviations involving price reductions. However, for sufficiently low attentiveness, price rises are also a concern.

Suggested Citation

  • Nicolas de Roos & Vladimir Smirnov, 2020. "Collusion with intertemporal price dispersion," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 158-188, March.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:1:p:158-188
    DOI: 10.1111/1756-2171.12309
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    Cited by:

    1. Korff, Alex, 2021. "Competition on the fast lane: The price structure of homogeneous retail gasoline stations," DICE Discussion Papers 359, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Wenzel, Tobias, 2024. "Collusion, inattentive consumers and shrouded prices," Journal of Economic Behavior & Organization, Elsevier, vol. 218(C), pages 579-591.
    3. Roos, Nicolas de & Smirnov, Vladimir, 2021. "Collusion, price dispersion, and fringe competition," European Economic Review, Elsevier, vol. 132(C).
    4. Øystein Foros & Mai Nguyen-Ones & Frode Steen, 2021. "The Effects of a Day off from Retail Price Competition: Evidence on Consumer Behavior and Firm Performance in Gasoline Retailing," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 28(1), pages 49-87, January.
    5. Nicolas de Roos, 2018. "Collusion with limited product comparability," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 481-503, September.
    6. Tveito, Andreas, 2019. "Coordination and price leadership in an unregulated environment," Working Papers in Economics 4/19, University of Bergen, Department of Economics.
    7. de Roos, Nicolas, 2017. "Edgeworth cycles with partial price commitment," Economics Letters, Elsevier, vol. 150(C), pages 122-125.
    8. Alderighi, Marco & Nicolini, Marcella, 2022. "Strategic information disclosure in vertical markets," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    9. Foros, Øystein & Nguyen-Ones, Mai, 2021. "Coordinate to obfuscate? The role of prior announcements of recommended prices," Economics Letters, Elsevier, vol. 198(C).
    10. N. M. Rozanova, 2025. "Digital Economy Cartels," Studies on Russian Economic Development, Springer, vol. 36(1), pages 135-140, February.

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