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Cheap talk, monitoring and collusion

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  • David Spector

    () (PSE - Paris School of Economics, CNRS - Centre National de la Recherche Scientifique)

Abstract

Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and the underlying information becomes publicly available with a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars. Such communication may allow firms to earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication.

Suggested Citation

  • David Spector, 2017. "Cheap talk, monitoring and collusion," Working Papers hal-01975642, HAL.
  • Handle: RePEc:hal:wpaper:hal-01975642
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01975642
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    References listed on IDEAS

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