Cheap Talk, Monitoring and Collusion

David Spector ()
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David Spector: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and the underlying information becomes publicly available with a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars. Such communication may allow firms to earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication.

Date: 2022-03
New Economics Papers: this item is included in nep-com, nep-gth, nep-mic and nep-reg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03760756
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Published in Review of Industrial Organization, 2022, 60 (2), pp.193-216. ⟨10.1007/s11151-021-09851-w⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03760756

DOI: 10.1007/s11151-021-09851-w

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