Information Exchange in Cartels
Antitrust authorities view the exchange of information among firms regarding costs, prices or sales as anti-competitive. Such exchanges allow competitors to closely monitor each other, thereby facilitating collusion. But the exchange of aggregate information, perhaps via a third party, is legal. The logic is that collusion is difficult if the identity of a price-cutting firm cannot be ascertained. Here, we examine this logic using Stigler's (1964) model of secret price cuts. We first identify circumstances such that when no information exchange is possible, collusion is difficult. We then show that if firms' aggregate sales are made public, nearly-perfect collusion is possible.
|Work Title||Information Exchange in Cartels|
|License||Public Domain Mark 1.0|
|Deposited||April 11, 2021|
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