Transparency and Tacit Collusion
This paper investigates the effects on tacit collusion of increased market transparency on the consumer side as well as on the producer side of a market. Increasing market transparency on the consumer side, increases the benefits to a firm from undercutting the collusive price. It also decreases the punishment profit (whether the punishment is Nash-reversion or optimal punishment). The net effect is that collusion becomes harder to sustain. Increasing market transparency on the producer side facilitates collusion. When transparency is increased on both sides, the net effect is that collusion becomes harder to sustain.
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