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Information exchange in cartels

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  • Yu Awaya
  • Vijay Krishna

Abstract

Antitrust authorities view the exchange of information among firms regarding costs, prices, or sales as anticompetitive. 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 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.

Suggested Citation

  • Yu Awaya & Vijay Krishna, 2020. "Information exchange in cartels," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 421-446, June.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:2:p:421-446
    DOI: 10.1111/1756-2171.12320
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    References listed on IDEAS

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    Cited by:

    1. Choe, Chongwoo & Matsushima, Noriaki & Tremblay, Mark J., 2022. "Behavior-based personalized pricing: When firms can share customer information," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    2. David Spector, 2021. "Market share transparency, signaling and welfare: Cournot and Bertrand," Working Papers halshs-02946654, HAL.
    3. Konstantinos Georgalos & Indrajit Ray & Sonali SenGupta, 2020. "Nash versus coarse correlation," Experimental Economics, Springer;Economic Science Association, vol. 23(4), pages 1178-1204, December.
    4. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," PSE-Ecole d'économie de Paris (Postprint) halshs-03760756, HAL.
    5. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(2), pages 193-216, March.
    6. Trivikram Dokka Venkata Satyanaraya & Herve Moulin & Indrajit Ray & Sonali Sen Gupta, 2020. "Equilibrium Design by Coarse Correlation in Quadratic Games," Working Papers 301895429, Lancaster University Management School, Economics Department.
    7. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Post-Print halshs-03760756, HAL.
    8. Trivikram Dokka & Hervé Moulin & Indrajit Ray & Sonali SenGupta, 2023. "Equilibrium design in an n-player quadratic game," Review of Economic Design, Springer;Society for Economic Design, vol. 27(2), pages 419-438, June.

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