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Collusion Theory: Where to Go Next?

  • Luís Cabral


This note comments on Feuerstein's (Feuerstein, Switgard, “Collusion in industrial economics: A survey,” forthcoming in Journal of Industry, Competition and Trade, 2005) survey of collusion theory. I start by presenting evidence from a recent real-world collusion case: the lysine industry. Based on this, I point out a few areas where collusion theory can improve: (a) the problem of equilibrium choice (bargaining over each firm's share), which is especially important in asymmetric oligopolies; (b) the problem of equilibrium implementation, including in particular communication in an asymmetric information context; and (c) the relation between price wars and collusion. I conclude with a few notes on policy issues, namely leniency programs and cartel detection strategies. Copyright Springer Science + Business Media, Inc. 2005

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Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 5 (2005)
Issue (Month): 3 (December)
Pages: 199-206

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Handle: RePEc:kap:jincot:v:5:y:2005:i:3:p:199-206
DOI: 10.1007/s10842-005-4869-4
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  1. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
  2. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
  3. Robert Porter, 2005. "Detecting Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 26(2), pages 147-167, December.
  4. Joseph E Harrington & Jr Andrzej Skrzypacz, 2004. "Collusion under Monitoring of Sales," Economics Working Paper Archive 509, The Johns Hopkins University,Department of Economics, revised Mar 2005.
  5. Susan Athey & Kyle Bagwell, 1999. "Optimal Collusion with Private Information," Working papers 99-17, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Meghan Busse, 2002. "Firm Financial Condition and Airline Price Wars," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 298-318, Summer.
  7. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  8. Susan Athey & Kyle Bagwell, 2004. "Collusion with Persistent Cost Shocks," Levine's Bibliography 122247000000000334, UCLA Department of Economics.
  9. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  10. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
  11. Heski Bar-Isaac & Mariagiovanna Baccara, 2006. "How to Organize Crime," Working Papers 06-07, New York University, Leonard N. Stern School of Business, Department of Economics.
  12. Luís M. B. Cabral, 2000. "Introduction to Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032864, December.
  13. Levenstein, Margaret C, 1997. "Price Wars and the Stability of Collusion: A Study of the Pre-World War I Bromine Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 117-37, June.
  14. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  15. Robert H. Porter & J. Douglas Zona, 1992. "Detection of Bid Rigging in Procurement Auctions," NBER Working Papers 4013, National Bureau of Economic Research, Inc.
  16. Switgard Feuerstein, 2005. "Collusion in Industrial Economics—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 5(3), pages 163-198, December.
  17. Mariagiovanna Baccara & Heski Bar-Isaac, 2008. "How to Organize Crime -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1039-1067.
  18. Marshall, R.C. & Richard J.F., 1995. "Bider Collusion at Forest Service Timber Sales," Papers 7-95-3, Pennsylvania State - Department of Economics.
  19. Abrantes-Metz, Rosa M. & Froeb, Luke M. & Geweke, John & Taylor, Christopher T., 2006. "A variance screen for collusion," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 467-486, May.
  20. Fershtman, Chaim & Pakes, Ariel, 2005. "Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work," CEPR Discussion Papers 5024, C.E.P.R. Discussion Papers.
  21. Meghan R. Busse, 2002. "Firm Financial Condition and Airline Price Wars," Yale School of Management Working Papers ysm281, Yale School of Management.
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