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Faking Patience with Tacit Collusion

Author

Listed:
  • Elena Parilina

    (Saint Petersburg State University, 7/9 Universitetskaya nab., Saint Petersburg 199034, Russia)

  • Alessandro Tampieri

    (Department of Economics and Business, University of Florence and CREA, University of Luxembourg, Via delle Pandette 9, Florence 50127, Italy)

Abstract

This paper analyzes coordination in tacit collusion when firms’ discount factor is private information. We consider an infinitely repeated duopoly where two states of the world randomly occur, with different incentives for collusion. Depending on its own discount factor, a firm chooses cooperative behavior in both states (patient), in none of the states (impatient) or in one state (mildly patient). The presence of different states affects the strategic role of beliefs. A mildly patient firm has an incentive in “faking patience†to get the deviation profit. Interestingly, this effect prevents or delays collusion when the belief in patience is strong.

Suggested Citation

  • Elena Parilina & Alessandro Tampieri, 2023. "Faking Patience with Tacit Collusion," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 25(02), pages 1-34, June.
    • Handle: RePEc:wsi:igtrxx:v:25:y:2023:i:02:n:s0219198923500032
    DOI: 10.1142/S0219198923500032
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    More about this item

    Keywords

    Tacit collusion; duopoly games; unknown discount factor;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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