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Alternating Monopoly And Tacit Collusion

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  • Andrea Amelio
  • Sara Biancini

Abstract

This paper considers the use of the alternating monopoly strategy (AMS) as a (tacit) collusion device. We show that firms may choose this strategy in particular environments, when other collusive strategies are also feasible. In particular, we stress how the presence of an observable move (entry), distinct from the competitive stage (price setting), can serve as a coordination device, reducing monitoring costs in incomplete information environments. The paper thus shows that AMS may be preferable to the classic market sharing strategy (MSS) and in some cases it is the only collusive equilibrium.

Suggested Citation

  • Andrea Amelio & Sara Biancini, 2010. "Alternating Monopoly And Tacit Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 402-423, June.
    • Handle: RePEc:bla:jindec:v:58:y:2010:i:2:p:402-423
    DOI: 10.1111/j.1467-6451.2010.00412.x
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    2. Aljoscha Janssen, 2022. "Price dynamics of Swedish pharmaceuticals," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 313-351, December.
    3. Luke Garrod & Matthew Olczak, 2021. "Supply‐ vs. Demand‐Side Transparency: The Collusive Effects Under Imperfect Public Monitoring," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 537-560, September.
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    5. Liliane Karlinger, 2008. "How Demand Information Can Destabilize a Cartel," Vienna Economics Papers 0803, University of Vienna, Department of Economics.
    6. Janssen, Aljoscha, 2020. "Price Dynamics of Swedish Pharmaceuticals," Working Paper Series 1325, Research Institute of Industrial Economics.
    7. Luke Garrod & Matthew Olczak, 2017. "Collusion Under Imperfect Monitoring with Asymmetric Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 654-682, September.

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