Tuesday, January 24, 2017
David Spector (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - Ecole des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - Ecole des Ponts ParisTech (ENPC), PSE - Paris School of Economics) has an interesting paper on Facilitating collusion by exchanging non-verifiable sales reports.
ABSTRACT: A number of collusive agreements involve the exchange of self-reported sales data between firms, which use them to monitor compliance with a target market share allocation. This paper shows that such communication between competitors may facilitate collusion even if all private information becomes public after 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 as a tool for mutual disciplining. In some cases, efficient collusion cannot occur unless firms are able to engage in such communication.