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Forward trading and collusion of firms in volatile markets

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  • Aichele, Markus F.

Abstract

Assuming deterministic demand Liski and Montero (2006) show that forward trading is able to facilitate collusion. We present a more concise model incorporating the main reason for forward trading: Uncertainty. In general, fl uctuations make collusion harder to sustain (Rotemberg and Saloner, 1986). However, using forward contracts, firms are able to decrease the incentives to deviate from a collusive agreement even in very volatile markets. This makes collusive strategies more sustainable and decreases social welfare.

Suggested Citation

  • Aichele, Markus F., 2012. "Forward trading and collusion of firms in volatile markets," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62029, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc12:62029
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    References listed on IDEAS

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    1. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    2. Ressner, Ludwig & Liski, Matti & Montero, Juan-Pablo, 2010. "Corrigendum to "Forward trading and collusion in oligopoly" [J. Econ. Theory 131 (1) (2006) 212-230]," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2496-2497, November.
    3. Blaise Allaz, 1992. "Oligopoly, uncertainty and strategic forward transactions," Post-Print hal-00511812, HAL.
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    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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    7. Liski, Matti & Montero, Juan-Pablo, 2006. "Forward trading and collusion in oligopoly," Journal of Economic Theory, Elsevier, vol. 131(1), pages 212-230, November.
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    More about this item

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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