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Collusion under monitoring of sales

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  • Joseph E. Harrington Jr.
  • Andrzej Skrzypacz

Abstract

Collusion under imperfect monitoring is explored when firms' prices are private information and their quantities are public information; an information structure consistent with several recent price-fixing cartels such as those in lysine and vitamins. For a class of symmetric duopoly games, it is shown that symmetric equilibrium punishments cannot sustain any collusion. An asymmetric punishment is characterized which does sustain collusion and it has the firm with sales exceeding its quota compensating the firm with sales below its quota. In practice, cartels have performed such transfers through sales among the cartel members.
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Suggested Citation

  • Joseph E. Harrington Jr. & Andrzej Skrzypacz, 2007. "Collusion under monitoring of sales," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 314-331, June.
    • Handle: RePEc:bla:randje:v:38:y:2007:i:2:p:314-331
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    File URL: http://hdl.handle.net/10.1111/j.1756-2171.2007.tb00070.x
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