Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248280 
Year of Publication: 
2021
Series/Report no.: 
DICE Discussion Paper No. 375
Publisher: 
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Düsseldorf
Abstract: 
Sophisticated collusive compensation schemes such as assigning future market shares or direct transfers are frequently observed in detected cartels. We show formally why these schemes are useful for dampening deviation incentives when colluding firms are temporary asymmetric. The relative attractiveness of each of these schemes is shaped by firms' ability to predict future market conditions, possibly aided by algorithms. Prices and profits are inverse u-shaped in prediction ability. Assigning future market shares is optimal when prediction ability is intermediate, and otherwise direct transfers are optimal. Competition authority's limited resources should be utilized to respond to these changing market conditions.
Subjects: 
algorithmic collusion
market forecasting
prediction ability
firm asymmetry
compensation schemes
JEL: 
D21
L41
L51
ISBN: 
978-3-86304-374-2
Document Type: 
Working Paper

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