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Alternating Monopoly and Tacit Collusion

Author

Listed:
  • Andréa Amelio

    (Directorate General Competition - European Commission [Brussels])

  • Sara Biancini

    (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper considers the use of the alternating monopoly strategy (AMS) as a (tacit) collusion device. We show that firms may choose this strategy in particular environments, when other collusive strategies are also feasible. In particular, we stress how the presence of an observable move (entry), distinct from the competitive stage (price setting), can serve as a coordination device, reducing monitoring costs in incomplete information environments. The paper thus shows that AMS may be preferable to the classic market sharing strategy (MSS) and in some cases it is the only collusive equilibrium.

Suggested Citation

  • Andréa Amelio & Sara Biancini, 2010. "Alternating Monopoly and Tacit Collusion," Post-Print halshs-01103810, HAL.
    • Handle: RePEc:hal:journl:halshs-01103810
    DOI: 10.1111/j.1467-6451.2010.00412.x
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    References listed on IDEAS

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    Cited by:

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    2. Aljoscha Janssen, 2022. "Price dynamics of Swedish pharmaceuticals," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 313-351, December.
    3. 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.
    4. Johannes M. Lehner & David McMillan, 2015. "Making sense in asset markets: Strategies for Implicit Organizations," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1024022-102, December.
    5. Liliane Karlinger, 2008. "How Demand Information Can Destabilize a Cartel," Vienna Economics Papers 0803, University of Vienna, Department of Economics.
    6. Janssen, Aljoscha, 2020. "Price Dynamics of Swedish Pharmaceuticals," Working Paper Series 1325, Research Institute of Industrial Economics.
    7. Luke Garrod & Matthew Olczak, 2017. "Collusion Under Imperfect Monitoring with Asymmetric Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 654-682, September.

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