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Tacit Collusion

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  • Rees, Ray

Abstract

Tacit collusion is rationalized as a non-cooperative equilibrium of a repeated game. The paper first surveys the recent game-theoretic literature on collusive equilibrium supported by threats of retaliation against deviation. It then discusses the practices which firms adopt to facilitate the achievement and maintenance of such equilibria. It concludes by relating the discussion to anti-trust policy in the U.S., U.K. and EEC. A policy based on illegality of conduct, such as that in the U.S. and EEC, is incapable of dealing effectively with tacit collusion because no overt conspiracy in involved. A policy which evaluates the economic efficiency of outcomes, whatever the conduct, is more effective. This should be taken into account in the proposed reshaping of U.K. competition policy. Copyright 1993 by Oxford University Press.

Suggested Citation

  • Rees, Ray, 1993. "Tacit Collusion," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 9(2), pages 27-40, Summer.
    • Handle: RePEc:oup:oxford:v:9:y:1993:i:2:p:27-40
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    Cited by:

    1. Marcelo Resende & Rodrigo M. Zeidan, 2011. "Tacit Collusion under Imperfect Monitoring in the Canadian Manufacturing Industry: An Empirical Study," CESifo Working Paper Series 3623, CESifo.
    2. Randøy, Trond & Strandenes, Siri Pettersen, 1997. "The effect of public ownership and deregulation in the Scandinavian airline industry," Journal of Air Transport Management, Elsevier, vol. 3(4), pages 211-215.
    3. Kesternich, Iris & Schumacher, Heiner, 2009. "On the Use of Information in Repeated Insurance Markets," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 280, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    4. Verboven, Frank, 1997. "Collusive behavior with heterogeneous firms," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 121-136, May.

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