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Coordinate to obfuscate? The role of prior announcements of recommended prices

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  • Foros, Øystein
  • Nguyen-Ones, Mai

Abstract

Firms may want to coordinate industry-wide price jumps that are predictable for rivals, however, unpredictable for consumers. We show how such coordination is carried out in Norwegian gasoline retailing. Overnight, the market leader initiated an equilibrium transition from regular to non-regular price jumps Prior announcements of a non-transaction price variable, recommended prices, are used to coordinate the timing and the level of industry-wide price jumps.

Suggested Citation

  • Foros, Øystein & Nguyen-Ones, Mai, 2021. "Coordinate to obfuscate? The role of prior announcements of recommended prices," Economics Letters, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:ecolet:v:198:y:2021:i:c:s0165176520304407
    DOI: 10.1016/j.econlet.2020.109680
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    References listed on IDEAS

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    1. Nicolas de Roos & Vladimir Smirnov, 2020. "Collusion with intertemporal price dispersion," RAND Journal of Economics, RAND Corporation, vol. 51(1), pages 158-188, March.
    2. Øystein Foros & Frode Steen, 2013. "Vertical Control and Price Cycles in Gasoline Retailing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 115(3), pages 640-661, July.
    3. Harrington, Joseph E., 2017. "A theory of collusion with partial mutual understanding," Research in Economics, Elsevier, vol. 71(1), pages 140-158.
    4. Carlin, Bruce I., 2009. "Strategic price complexity in retail financial markets," Journal of Financial Economics, Elsevier, vol. 91(3), pages 278-287, March.
    5. David P. Byrne & Nicolas de Roos, 2019. "Learning to Coordinate: A Study in Retail Gasoline," American Economic Review, American Economic Association, vol. 109(2), pages 591-619, February.
    6. Zhongmin Wang, 2009. "(Mixed) Strategy in Oligopoly Pricing: Evidence from Gasoline Price Cycles Before and Under a Timing Regulation," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 987-1030, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Price coordination; Consumer obfuscation; Prior announcements;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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