Impossibility of Collusion under Imperfect Monitoring with Flexible Production
We show that it is impossible to achieve collusion in a duopoly when (1) goods are homogenous and firms compete in quantities, (2) new, imperfect information arrives continuously, without sudden events and (3) firms are able to respond to this new information quickly. The result holds even if we allow for asymmetric equilibria or monetary transfers. The intuition is that the flexibility to respond to new information quickly unravels any collusive scheme and that signals about the aggregate behavior only cannot be used effectively to provide individual incentives via transfers. Our result applies both to a simple stationary model and a more complicated one with prices following a mean-reverting Markov process.
|Date of creation:||May 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Stanford University, Stanford, CA 94305-5015|
Phone: (650) 723-2146
Web page: http://gsbapps.stanford.edu/researchpapers/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David A. Miller, 2012.
"Robust Collusion with Private Information,"
Review of Economic Studies,
Oxford University Press, vol. 79(2), pages 778-811.
- David A. Miller, 2005. "The dynamic cost of ex post incentive compatibility in repeated games of private information," Game Theory and Information 0510002, EconWPA.
- David G. Pearce & Dilip Abreu & Paul R. Milgrom, 1988.
"Information and Timing in Repeated Partnerships,"
Cowles Foundation Discussion Papers
875, Cowles Foundation for Research in Economics, Yale University.
- Joseph E. Harrington Jr. & Andrzej Skrzypacz, 2007.
"Collusion under monitoring of sales,"
RAND Journal of Economics,
RAND Corporation, vol. 38(2), pages 314-331, 06.
- Skrzypacz, Andrzej & Harrington, Joseph E., 2005. "Collusion under Monitoring of Sales," Research Papers 1885, Stanford University, Graduate School of Business.
- 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.
- Edward J Green & Robert H Porter, 1997.
"Noncooperative Collusion Under Imperfect Price Information,"
Levine's Working Paper Archive
1147, David K. Levine.
- Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
- Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Kyle Bagwell, 2004.
"Collusion and Price Rigidity,"
Theory workshop papers
658612000000000081, UCLA Department of Economics.
- Drew Fudenberg & David K. Levine & Eric Maskin, 1994.
"The Folk Theorem with Imperfect Public Information,"
Levine's Working Paper Archive
2058, David K. Levine.
- 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.
- Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers 523, Massachusetts Institute of Technology (MIT), Department of Economics.
- Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 394, David K. Levine.
- Hopenhayn, Hugo A. & Skrzypacz, Andrzej, 2001.
"Tacit Collusion in Repeated Auctions,"
1698r2, Stanford University, Graduate School of Business.
- Hay, George A & Kelley, Daniel, 1974. "An Empirical Survey of Price Fixing Conspiracies," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 13-38, April.
- Andreas Blume & Paul Heidhues, 2008. "Modeling Tacit Collusion in Auctions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 163-184, March.
- Susan Athey & Kyle Bagwell, 1999.
"Optimal Collusion with Private Information,"
99-17, Massachusetts Institute of Technology (MIT), Department of Economics.
- Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
When requesting a correction, please mention this item's handle: RePEc:ecl:stabus:1887. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.