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Information exchange through non-binding advance price announcements: an antitrust analysis

Author

Listed:
  • Willem Boshoff

    (Stellenbosch University)

  • Stefan Frübing

    (ZEW Centre for European Economic Research and MaCCI Mannheim Centre for Competition and Innovation)

  • Kai Hüschelrath

    (ZEW Centre for European Economic Research and MaCCI Mannheim Centre for Competition and Innovation
    University of Mannheim, L7, 3-5)

Abstract

We study the welfare effects of non-binding advance price announcements. Applying a simulation-based approach in a differentiated Bertrand model with horizontal products and asymmetric information, we find that such announcements can help firms to gain information on each other thereby allowing them to achieve higher profits. However, our results also show that the overall welfare effects of such announcements in a context of heterogeneous products are not as clear-cut as previous research in a homogeneous products framework has suggested. We conclude that—although non-binding advance price announcements may raise competition concerns—in many settings, their positive effects are likely to outweigh the potential detrimental effects on welfare.

Suggested Citation

  • Willem Boshoff & Stefan Frübing & Kai Hüschelrath, 2018. "Information exchange through non-binding advance price announcements: an antitrust analysis," European Journal of Law and Economics, Springer, vol. 45(3), pages 439-468, June.
    • Handle: RePEc:kap:ejlwec:v:45:y:2018:i:3:d:10.1007_s10657-016-9549-9
    DOI: 10.1007/s10657-016-9549-9
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    Cited by:

    1. Haan, Marco A. & Heijnen, Pim & Obradovits, Martin, 2023. "Competition with list prices," Games and Economic Behavior, Elsevier, vol. 140(C), pages 502-528.
    2. Janssen, Maarten & Reshidi, Edona, 2022. "Regulating recommended retail prices," International Journal of Industrial Organization, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Antitrust policy; Collusion; Information exchange; Price announcements;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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