Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97227
Authors: 
Mouraviev, Igor
Year of Publication: 
2013
Series/Report no.: 
Working Papers, Center for Mathematical Economics 494
Abstract: 
The article seeks to fill the gap between tacit and explicit collusion in a setting where firms observe only their own output levels and a common price, which includes a stochastic component. Without communication, firms fail to discriminate between random shocks and marginal deviations, which constrains the scope for collusion. By eliminating uncertainty about what has happened, communication facilitates detection of deviations but reduces collusive profits due to the risk of exposure to legal sanctions. With the optimal collusive strategy, firms communicate only if the market price falls somewhat below the trigger price. Moreover, they tend to communicate more often as they become less patient, a cartel grows in size, or demand uncertainty rises.
Subjects: 
Collusion
Communication
Imperfect Monitoring
Frequency of Meetings
JEL: 
D82
L41
Document Type: 
Working Paper

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