Silence is golden: communication, silence, and cartel stability
This paper studies how cartel stability is influenced by asymmetric information and communication about demand. Firms in a cartel face fluctuating demand in a repeated game framework. In each period, one randomly chosen firm knows current demand. In this context we consider two different equilibria -- one where the informed firm communicates its information to its partners and another where it does not. We show that cartels are extremely unstable when the informed firm communicates with the uninformed firms. However, when the informed firm does not communicate with the uninformed firms cartels can be as stable as when there are no demand fluctuations at all.
|Date of creation:||Jan 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 1998.
"Collusion and Price Rigidity,"
98-23, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aoyagi, Masaki, 2002. "Collusion in Dynamic Bertrand Oligopoly with Correlated Private Signals and Communication," Journal of Economic Theory, Elsevier, vol. 102(1), pages 229-248, January.
- Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
- Athey, Susan & Bagwell, Kyle, 2001.
"Optimal Collusion with Private Information,"
RAND Journal of Economics,
The RAND Corporation, vol. 32(3), pages 428-65, Autumn.
- Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
- Sproul, Michael F, 1993. "Antitrust and Prices," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 741-54, August.
- Severin Borenstein & Andrea Shepard, 1993.
"Dynamic Pricing in Retail Gasoline Markets,"
NBER Working Papers
4489, National Bureau of Economic Research, Inc.
- Conlon, John R., 2003. "Hope springs eternal: learning and the stability of cooperation in short horizon repeated games," Journal of Economic Theory, Elsevier, vol. 112(1), pages 35-65, September.
- Feinberg, Robert M, 1980. "Antitrust Enforcement and Subsequent Price Behavior," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 609-12, November.
- 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:pra:mprapa:44246. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.