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.

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Work Title Information Exchange in Cartels
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Open Access
Creators
  1. Yu Awaya
  2. Vijay Krishna
Keyword
  1. Cartels, collusion, information
License CC BY-NC 4.0 (Attribution-NonCommercial)
Work Type Article
Publisher
  1. RAND Journal of Economics
Publication Date 2020
Deposited April 11, 2021

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    • RAND Journal of Economics
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