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Maintaining Privacy in Cartels

Author

Listed:
  • Takuo Sugaya
  • Alexander Wolitzky

Abstract

It is conventional wisdom that transparency in cartels--monitoring of competitors' prices, sales, and profits--facilitates collusion. However, in several recent cases cartels have instead worked to preserve the privacy of their participants' actions and outcomes. Toward explaining this behavior, we show that cartels can sometimes sustain higher profits when actions and outcomes are observed only privately, because better information can hinder collusion by helping firms devise more profitable deviations from the collusive agreement. We provide conditions under which maintaining privacy is optimal for cartels that follow a market-segmentation strategy.

Suggested Citation

  • Takuo Sugaya & Alexander Wolitzky, 2018. "Maintaining Privacy in Cartels," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2569-2607.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/699975
    DOI: 10.1086/699975
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    Cited by:

    1. David P. Brown & Andrew Eckert, 2022. "Pricing Patterns in Wholesale Electricity Markets: Unilateral Market Power or Coordinated Behavior?," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 168-216, March.
    2. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," PSE-Ecole d'économie de Paris (Postprint) halshs-03760756, HAL.
    3. Daehyun Kim & Ichiro Obara, 2023. "On the Value of Information Structures in Stochastic Games," Papers 2308.09211, arXiv.org.
    4. Yu Awaya, 2019. "Collusion and Information Exchange," The Japanese Economic Review, Springer, vol. 70(3), pages 394-402, September.
    5. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(2), pages 193-216, March.
    6. Luke Garrod & Matthew Olczak, 2021. "Supply‐ vs. Demand‐Side Transparency: The Collusive Effects Under Imperfect Public Monitoring," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 537-560, September.
    7. Yu Awaya & Vijay Krishna, 2020. "Information exchange in cartels," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 421-446, June.
    8. Bayona, Anna & López, Ángel L. & Manganelli, Anton-Giulio, 2022. "Common ownership, corporate control and price competition," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1066-1075.
    9. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Post-Print halshs-03760756, HAL.
    10. Jeanine Miklós-Thal & Catherine Tucker, 2019. "Collusion by Algorithm: Does Better Demand Prediction Facilitate Coordination Between Sellers?," Management Science, INFORMS, vol. 65(4), pages 1552-1561, April.

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