Monday, June 17, 2019

Predictive Analytics

Daryl Lim, John Marshall Law addresses Predictive Analytics.

ABSTRACT: “Predictive Analytics” blends the latest research in behavioral economics with artificial intelligence to address one of the most important legal questions at the heart of intellectual property law and antitrust law – how do courts and agencies make judgments about innovation and competition policies? How can they better predict the consequences of intervention or non-intervention?

The premise of this Article is that we should not continue to build doctrine at the IP-antitrust on theoretical neoclassical assumptions alone but also on the reality of markets using all that AI has to offer us. Behavioral economics and AI do not replace traditional antitrust analysis. Rather they are complements and imbue antitrust law with continuing durability. 

Predicting competitive effects is difficult and we need tools to predict outcomes as precisely and reliably as possible. Until now, antitrust law has only been able to operate before a veil of assumptions and rhetoric. Stakeholders have only been able to think about whether and how to intervene in the exercise of IP rights, particularly patent rights, in the broadest terms since even the smallest perturbations in a complicated set of variables can set off ripples that lead to dramatically divergent outcomes. Facts have always mattered in antitrust law, and a more expansive toolkit can only increase our likelihood of getting it right.

Behavioral economics sheds light on anticompetitive conduct that neoclassical antitrust may regard as irrational and therefore improbable. Once we recognize that it is rational and probable, we need to quantify and value the effects of the conduct. To do this, we need to employ more of the analogical reasoning intrinsic in antitrust law. For that, predictive analytics is very good in helping stakeholders with pattern recognition and simulation runs. This brings us closer to being able to ascribe value which human judgment can be brought to bear. In these, AI provides stakeholders with augmented capabilities to confront the computational challenges these tasks require. 

June 17, 2019 | Permalink | Comments (0)

EU Merger Policy Predictability Using Random Forests

Pauline Affeldt, German Institute for Economic Research (DIW Berlin); Technische Universität Berlin (TU Berlin) discusses EU Merger Policy Predictability Using Random Forests.

ABSTRACT: I study the predictability of the EC’s merger decision procedure before and after the 2004 merger policy reform based on a dataset covering all affected markets of mergers with an official decision documented by DG Comp between 1990 and 2014. Using the highly flexible, non-parametric random forest algorithm to predict DG Comp’s assessment of competitive concerns in markets affected by a merger, I find that the predictive performance of the random forests is much better than the performance of simple linear models. In particular, the random forests do much better in predicting the rare event of competitive concerns. Secondly, postreform, DG Comp seems to base its assessment on a more complex interaction of merger and market characteristics than pre-reform. The highly flexible random forest algorithm is able to detect these potentially complex interactions and, therefore, still allows for high prediction precision.

June 17, 2019 | Permalink | Comments (0)

The Future of Competition Policy in Europe - Some reflections on the interaction between industrial policy and competition law

IOannis Lianos, UCL describes The Future of Competition Policy in Europe - Some reflections on the interaction between industrial policy and competition law.

ABSTRACT: The paper explores the interaction between industrial policy and competition law, in particular merger control in Europe. It reflects on the tensions. actual and perceived between these two policies and critically assesses the substantive and institutional solutions that have been proposed, In particular in the recent Franco-German Manifesto for a European industrial policy fit for the 21st Century

June 17, 2019 | Permalink | Comments (0)

Reconciling Efficiency and Equity A Global Challenge for Competition Policy

Damien Gerard, College of Europe (Global Competition Law Center), University of Louvain and Ioannis Lianos, University College London have edited a volume Reconciling Efficiency and Equity A Global Challenge for Competition Policy to honor Eleanor Fox.

BOOK ABSTRACT: Due to the growing influence of economics and economists in competition law and policy discourse and the internationalization of antitrust, the equity versus efficiency trade-off debate has played a defining role in the transformation of the dominant paradigm governing competition law enforcement since at least the 1970s. The debate remains crucial today as issues of economic inequality and its interaction with efficiency become of central concern to policy and decision-makers in competition law, as well as in other spheres of public policy. Despite their central role in the grammar of competition law on the global plane, the intellectual underpinnings of the interactions between 'equity' and 'efficiency' in the context of competition law have never been examined in-depth. This book aims precisely to fill this gap by discussing new approaches in understanding the role of efficiency and equity concerns in competition law.

June 17, 2019 | Permalink | Comments (0)

Sunday, June 16, 2019

HKU-Lingnan-Florida Platform Competition Conference June 20-21, 2019 (Thursday & Friday)

Platform Competition Conference

June 20-21, 2019 (Thursday & Friday)

KK315, 3/F, K.K. Leung Building,
The University of Hong Kong

6.5 CPD points will be awarded after attending the first day of the conference on June 20

Attendance is free.  Register here.

Welcome message

Welcome to HKU and to the online platforms conference. The first day of the conference is geared to practitioners and policy questions while the second day focuses on bridging the understanding of online platforms across academic disciplines. Competition analysis of online markets is a hot topic around the world. In a number of jurisdictions, online markets already have been subject to competition law review in merger or conduct cases. In other jurisdictions, these issues are in a nascent stage of policy. A number of lessons can be learned from the cases to date involving online markets with regard to optimal competition policy. What these cases tend to share are some basic features as to how online markets work. Some jurisdictions understand the particular dynamics of multi-sided online markets. Other competition authorities sometimes may misidentify these markets and the market dynamics therein. We will explore both what is known and the gaps in knowledge to better understand these market dynamics.

Conference conveners:

Yuk-fai FONG, The University of Hong Kong
Ping LIN, Lingnan University
D. Daniel SOKOL, University of Florida

June 20, 2019 (Thursday) - Practitioners’ Conference
KK315, 3/F, K.K. Leung Building, The University of Hong Kong


Session Details


8:15 - 8:50

Registration & Morning Refreshment


8:50 - 9:00

Welcoming Remarks
by Dean Hongbin CAI, Faculty of Business and Economics,
The University of Hong Kong


9:00 - 9:30

by Xuan WANG, Principal Staff Member of Anti-monopoly Bureau, State Administration for Market Regulation
(国家市场监督管理总局主任科员 王轩先生)


9:30 - 10:45

Panel 1: Enforcement in Multi-sided Platforms

Wing SUEN, Chair of Economics, Henry G Leong Professor in Economics, Faculty of Business and Economics, The University of Hong Kong

Na DAWSON, Vice President, Analysis Group, Inc
Youngjin JUNG, Partner, Kim & Chang
Alexander OKULIAR, Partner, Orrick, Herrington & Sutcliffe
Sadaaki SUWAZONO, Deputy Secretary General for International Affairs, Japan Fair Trade Commission


10:45 - 11:15

Coffee break


11:15 - 12:30

Panel 2: Mergers in the Digital Economy

Andrew FOSTER, Partner, Skadden, Arps, Slate, Meagher & Flom

Herbert FUNG, Senior Director (Business and Economics),
Competition and Consumer Commission of Singapore
Wayne LEACH, Partner, King & Wood Mallesons
Wesley WANG, Senior Associate, T&D Associates
Jason WU, Senior Vice President, Compass Lexecon


12:30 - 14:00

Chinese lunch

Senior Common Room, 14/F, K.K. Leung Building

14:00 - 14:30

Brent SNYDER, CEO, Hong Kong Competition Commission


14:30 - 15:45

Panel 3: Big Data and AI

Ruth CHEN, Associate General Counsel, Regulatory, Facebook

John CHOI, Senior Foreign Attorney (Partner), Shin & Kim
Patricia GALVAN, Assistant Director, Technology Task Force, Federal Trade Commission
Atsushi YAMADA, Partner, Anderson Mori & Tomotsune


15:45 - 16:15

Coffee break


16:15 - 17:30

Panel 4: Platforms in e-commerce and Fintech

Knut FOURNIER, Regional Counsel APAC, StubHub

Karen LEUNG, Counsel, Uber
Chen LIN, Associate Dean (Research and Knowledge Exchange),
Chair of Finance, Stelux Professor in Finance, Faculty of Business and Economics, Professor of Finance, The University of Hong Kong
Daniel SOKOL, University of Florida Research Foundation Professor, University Term Professor, University of Florida Fredric G. Levin College of Law



Dinner (by invitation)

Le Méridien Cyberport

June 21, 2019 (Friday) - Academic Conference
KK315, 3/F, K.K. Leung Building, The University of Hong Kong


Session Details


8:30 - 8:50

Registration & Morning Refreshment


8:50 - 9:00

Opening Remarks
by Yuk-fai FONG, Professor of Management and Strategy,
Professor of Economics, The University of Hong Kong


9:00 - 11:00

Paper Session 1

Kenneth CHENG, John B Higdon Eminent Scholar Chair,
University of Florida
Ruomeng CUI, Assistant Professor, Emory University
Sunny HUANG, Assistant Professor, The Hong Kong University of Science and Technology
Angela ZHANG, Associate Professor, The University of Hong Kong


11:00 - 11:30

Coffee break


11:30 - 13:00

Paper Session 2

Hung Hao CHANG, Professor, National Taiwan University
Chiara FARRONATO, Assistant Professor of Business Administration,
Harvard Business School
Guofu TAN, Professor of Economics, University of Southern California


13:00 - 14:00

Lunch buffet

KK603 - 604

14:00 - 15:30

Paper Session 3

Wesley KOO, Assistant Professor, INSEAD
Kelvin KWOK, Assistant Professor, Faculty of Law, The University of Hong Kong
Steven XU, Associate Professor of Economics, Faculty of Business and Economics, The University of Hong Kong


15:30 - 16:00

Coffee break


16:00 - 17:30

Paper Session 4

Ramnath CHELLAPPA, Professor and Associate Dean, Emory University
Jay CHOI, Professor, Michigan State University and Yonsei University
Richard XU, Ph.D. Student in Economics, University of Southern California


17:30 - 19:00

Cocktail reception


(Speakers’ sequence in alphabetical order of surname)



June 16, 2019 | Permalink | Comments (0)

Friday, June 14, 2019

Twelve Fallacies of the 'Neo-Antitrust' Movement

Seth B. Sacher and John M. Yun, George Mason University - Antonin Scalia Law School, offer Twelve Fallacies of the 'Neo-Antitrust' Movement.

ABSTRACT: Antitrust enforcement is back in the spotlight with advocates from both the political left and the populist political right demanding fundamental competition policy changes. While there are differences among those calling for such changes, several common beliefs generally unite them. This includes a contention that the writings and interpretations of Robert Bork and the Chicago School of economics have led antitrust astray in a manner fundamentally inconsistent with the original intent of the Sherman Act. Further, they are united by a belief that recent empirical, economic studies indicate the economy is becoming overly concentrated, that market power has been increasing dramatically, that performance in many, if not most, markets has been deficient, and that too much profit is going to too few firms. In this article, we identify and detail twelve fallacies of what we call the “neo-antitrust movement” and their associated claims. At the heart of these fallacies is a fundamental misunderstanding of economics and the consumer welfare standard that has been at the heart of competition policy since at least the 1960s. Additionally, there is a heavy reliance on studies that, upon closer scrutiny, do not support the positions of those who cite them. While competition law should be amenable to change, many of the proposals of the neo-antitrust movement would make antitrust less effective in its core mission without achieving the goal of ameliorating other possible injustices about which they are concerned.

June 14, 2019 | Permalink | Comments (0)

Digital Platforms and Antitrust Law

Keith Hylton, BU tackles Digital Platforms and Antitrust Law.

ABSTRACT: This is a paper about “big data” and antitrust law. For my purposes, big data refers to digital platforms that enable the discovery and sharing of information by consumers, and the harvesting and analysis of data on those consumers by the platform. The obvious example of such a platform is Google. The big platforms owe their market dominance not to anticompetitive conduct but to economies of scale. I discuss three types of anticompetitive conduct associated with digital platforms: kill zone expropriation, acquisition of nascent rivals, and denial of access to data. There is nothing so unusual about digital platforms that would require a reform of the antitrust laws. Some are described as two-sided markets, but this designation, even after Ohio v. Amex, should not present an obstacle to the application of antitrust law.

June 14, 2019 | Permalink | Comments (0)

Consumer Privacy and Serial Monopoly

Venkataraman Bhaskar, University of Texas at Austin and Nikita Roketskiy, University College London - Department of Economics discuss Consumer Privacy and Serial Monopoly.

ABSTRACT: We examine the implications of consumer privacy when preferences today depend upon past consumption choices, and consumers shop from different sellers in each period. Although consumers are ex ante identical, their initial consumption choices cannot be deterministic. Thus ex post heterogeneity in preferences arises endogenously. Consumer privacy improves social welfare, consumer surplus and the profits of the second-period seller, while reducing the profits of the first period seller, relative to the situation where consumption choices are observed by the later seller.

June 14, 2019 | Permalink | Comments (0)

Thursday, June 13, 2019

Regulating for Telecommunications Competition in Developing Countries: The Case of Papua New Guinea

Bronwyn E. Howell, Victoria University of Wellington - School of Management, Petrus H. Potgieter, University of South Africa, and Ronald Sofe, Papua New Guinea National Research Institute - Economic Policy Research Program examine Regulating for Telecommunications Competition in Developing Countries: The Case of Papua New Guinea.

ABSTRACT: Papua New Guinea is a low-middle income developing Asia-Pacific island country with a relatively long history of telecommunications market development under firstly Australian administration, and latterly under a pro-competitive set of regulatory arrangements strongly influenced by Australian policy-making. Nevertheless, it demonstrates some of the weakest sector performance statistics of a range of comparable low-middle income countries in its region. Why does a country with a regulatory regime drawing on current international recommended “best practice” perform so poorly?

To address this question, we develop an inquiry framework (checklist) for assessing the effectiveness of regulatory arrangements in a developing, as opposed to developed country. Whilst the framework is based on guidelines from the World Bank and the International Telecommunications Union (Blackman & Srivastava, 2011), we adapt these to take account of specific challenges arising in developing countries: limited capacity, limited commitment, limited accountability, limited fiscal efficiency and trade-offs between factors that take account of these limits (Laffont, 2005; Estache & Wren-Lewis, 2010).

Applying the inquiry framework to Papua New Guinea, we find that, the most likely explanation for poor performance derives from the government being both regulator and owner of the incumbent, Telikom. Lack of investment and an unstable set of ownership arrangements have constrained Telikom from being an effective competitor. Weaknesses exist in the monitoring and enforcement of regulator accountability provisions, but are unlikely to have altered sector outcomes, although they may have contributed to obscuring poor performance. Introduction of at least one more foreign operator will be beneficial, but only if the government can clearly separate its ownership and regulatory activities and political agents can credibly commit to refraining from interfering in the operational activities of both the incumbent firm and regulatory agencies.

June 13, 2019 | Permalink | Comments (0)

Algorithmic Information Disclosure by Regulators and Competition Authorities

Fabiana Di Porto, University of Salento - Department of Economic Sciences; LUISS Guido Carli University, and Mariateresa Maggiolino, Bocconi University - Department of Legal Studies; Ask Research Center study Algorithmic Information Disclosure by Regulators and Competition Authorities.

ABSTRACT: Also in the digital age, markets work properly as long as consumers are well informed. What is peculiar of the digital age is that consumers have become very fragile, also because firms can extensively manipulate the information that they produce and distribute to markets. Antitrust authorities may find their way to prosecute business manipulative conduct, as some rulings suggest. However, the enforcement of antitrust law is subject to precise circumstances and requires cumbersome proceedings, especially when dominant firms are involved. Therefore, a simpler and more widespread intervention is needed. Although over the years traditional disclosure regulation has showed its limits, today algorithmic analysis gives room to more effective forms of disclosure regulation. Therefore, the paper maintains that both regulators and antitrust authorities can use these new forms of disclosure regulation to perform better their functions. Thanks to algorithmic analysis, (a) regulators can provide consumers with targeted co-regulated disclosures; (b) while competition authorities, using their advocacy powers, can provide trustworthy rankings and reviews about firms’ ability to comply with antitrust and consumer protection laws.

June 13, 2019 | Permalink | Comments (0)

No-Fault Digital Platform Monopolization

Marina Lao, Seton Hall has written on No-Fault Digital Platform Monopolization.

ABSTRACT: The power of today’s tech giants has prompted calls for changes in antitrust law and policy which, for decades, has been exceedingly permissive in merger enforcement and in constraining dominant firm conduct. This article analyzes Section 2 of the Sherman Act (the law that prohibits monopolization), and the idea of no-fault legislation that some have suggested as a way to disperse the tech giants’ power. The article highlights the complications that may result from a blanket no-fault solution, and provides alternative suggestions for targeted changes to existing law that may prove more effective while at the same time impose fewer collateral costs.

June 13, 2019 | Permalink | Comments (0)

Multimarket Contact Under Imperfect Monitoring

Bingyong Zheng, Shanghai University of Finance and Economics - School of Economics studies Multimarket Contact Under Imperfect Monitoring.

ABSTRACT: This paper examines the effects of multimarket contact on collusive behaviors when firms are uncertain about rivals' past actions and IC constraint is violated in every single market. It shows that strategic linkages across markets relaxes the constraints imposed by discount factor on implicit agreements. In the basic model that assumes symmetric firms and markets, we find a spillover effect and an information aggregation effect from multimarket contact that has the potential to improve firms' abilities to collude. In an extended model with asymmetric markets, a cross-subsidization effect reinforces the two effects and relaxes the incentive constraints governing collusive agreements. Thus, contrary to common belief, neither asymmetry nor perfect monitoring is necessary for mutual forbearance.

June 13, 2019 | Permalink | Comments (0)

Wednesday, June 12, 2019

White Paper: Antitrust Analysis of NOPEC Legislation

Harry First (NYU) and Darren Bush (Houston discuss White Paper: Antitrust Analysis of NOPEC Legislation.

ABSTRACT: This White Paper analyzes the proposed “No Oil Producing and Exporting Cartels Act of 2019” (NOPEC). This legislation, which has been introduced in the United States Senate and House of Representatives, addresses the antitrust issues involved in allowing the Department of Justice to sue the Organization of the Petroleum Exporting Countries (OPEC), their member states, their state owned oil companies (SOEs), nonmember states and their SOEs, and private companies for their participation in an international cartel that has long been involved in regulating the production and distribution of oil and other petroleum products. 

The White Paper begins with a background discussion of the participants in the oil cartel. The paper then describes in detail the proposed legislation. The paper discusses how prior suits against OPEC have failed as courts have applied several substantive law doctrines—comity, Act of State, and the Foreign Sovereign Immunities Act—as well as rules on service of process under the Federal Rules of Civil procedure, to turn away the four private cases that have been filed. The paper then addresses how NOPEC is directed at removing the substantive defenses that have blocked the private party litigation and that might block litigation filed by the Justice Department. The bill removes the substantive law blocks, although an issue might remain if the Department brings a criminal prosecution, but NOPEC does not address the procedural issue of service of process. The White Paper concludes that NOPEC is an important part of a worldwide effort to stop international cartels that harm consumers and reduce economic welfare. 

This White Paper represents the authors’ views and does not represent the views of their institutions. While this White Paper was commissioned by Securing America’s Future Energy, the views expressed are solely those of the authors. 

June 12, 2019 | Permalink | Comments (0)

Online Reputation Mechanisms and the Decreasing Value of Chain Affliation

By: Hollenbeck, Brett
Abstract: This paper investigates the value of branding and how it is changing in response to a large increase in consumer information provided by online reputation mechanisms. As an application of umbrella branding, theory suggests much of the value to firms of chain affiliation results from asymmetric information between buyers and sellers. As more information becomes available, consumers should rely less on brand names as quality signals and the ability for firms to extend reputations across heterogenous outlets should decrease. To examine this empirically, this paper combines a large, 15 year panel of hotel revenues with millions of online reviews from multiple platforms and performs a machine learning analysis of review text to recover latent, time-varying dimensions of firm quality. I find that branded, or chain-affiliated, hotels earn substantially higher revenues than equivalent independent hotels, but that this premium has declined by over 50% from 2000 to 2015. I find that this can be largely attributed to an increase in online reputation mechanisms, and that this affect is largest for low quality and small market firms. Numerous measures of the information content of online reviews show that as information has increased, independent hotel revenue grows substantially more than chain hotel revenue. Finally, the correlation between firm revenue and brand-wide reputation is decreasing and the correlation with individual hotel reputation is replacing it.

June 12, 2019 | Permalink | Comments (0)

U.S. Competition Policy and the Free Market Philosophy: A Moral Justification

By: Bos, Iwan (Organisation and Strategy)
Abstract: Few today would doubt the need for competition rules in a free, marked-based society like the United States of America. From a free market philosophy perspective, however, there is something inherently paradoxical about the presence of competition policy. After all, the competition laws that are intended to combat restraints of trade are, in fact, themselves restraints of trade and their enforcement implies extensive government intervention. It is argued that competition policy is nevertheless compatible with the free market philosophy when the free market system would effectively disappear without it and it is shown that this possibility was considered real in the history of U.S. competition law enforcement. U.S. competition policy stimulates free market survival by shaping market structure and by promoting the free market spirit. Both make American competition policy consistent with the free market philosophy and consequently provide a moral justification for its presence.
Keywords: industrial organization
Date: 2019–01–28

June 12, 2019 | Permalink | Comments (0)

Cheap talk, monitoring and collusion

By: David Spector (PSE - Paris School of Economics, CNRS - Centre National de la Recherche Scientifique)
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.

June 12, 2019 | Permalink | Comments (0)

Tuesday, June 11, 2019

Toward a coherent policy on cartel damages

By: Jens-Uwe FranckMartin peitz
Abstract: The focus of cartel damages law is on the recovery of the cartel overcharge. Parties other than purchasers are often neglected, not only as a matter of judicial practice, but also due to legal restrictions. We argue that a narrow concept of standing—which excludes parties that supply either the cartel or the firms that purchase from the cartel with complementary product components—falls short of achieving effective antitrust enforcement and corrective justice in the best possible way. We provide a framework with two complementary products and show that under neither competition nor cartelization do the allocation and the distribution of surpluses depend on whether producers of complements purchase from the cartel or supply the cartel or the cartel’s customers. Thus, we argue that prima facie producers of complements should be treated alike, regardless of their position in the supply chain. Moreover, based on various factors that determine the enforcement effect of antitrust damages claims and their role as an instrument to achieve corrective justice, we show that a broad concept of standing is, indeed, the preferable legal solution. While its implementation would require a change in position by the U.S. federal courts, we submit that it would amount to a consistent completion of the legal framework within the E.U.

June 11, 2019 | Permalink | Comments (0)

Deception and Competition in Search Markets

By: Tobias GampDaniel Kraehmer
Abstract: We study the interplay between deception and consumer search in a search market where firms may deceive some naive consumers with inferior products that display hidden (bad) attributes. We derive an equilibrium in which both superior and inferior quality is offered and show that as search frictions vanish, superior goods are entirely driven out of the market. Deception harms sophisticated consumers, as it forces them to search longer to find a superior product. We argue that policy interventions that reduce search frictions such as the standardization of price and package formats may harm welfare. In contrast, reducing the number of naive consumers through transparency policies and education campaigns as well as a minimum quality standard can improve welfare.
Keywords: Deceptive product, Inferior product, Naivete, Consumer Search
JEL: D18 D21 D43 D83
Date: 2018–05

June 11, 2019 | Permalink | Comments (0)

Cost Efficiencies and Upward Pricing Pressure

By: Jessica Dutra (Department of Economics, The University of Kansas); Tarun Sabarwal (Department of Economics, University of Kansas)
Abstract: We investigate the accuracy of UPP as a tool in antitrust analysis when there are cost efficiencies from a horizontal merger. We include model-based, merger-specific cost efficiencies in a tractable manner and extend the standard UPP formulation to account for these efficiencies. The efficacy of the new UPP formulations is analyzed using Monte Carlo simulation of 40,000 mergers (8 scenarios, 5,000 mergers in each scenario). We find that the new UPP formulations yield substantial gains in prediction of post-merger prices, as compared to existing practice, and there are substantial gains in merger screening accuracy as well. Moreover, the new UPP formulations outperform the standard UPP formulation at higher thresholds for all the standard cases in the paper. The results support the inclusion of model-based cost efficiencies in the standard UPP formulation for more accurate antitrust decision-making.

June 11, 2019 | Permalink | Comments (0)

Monday, June 10, 2019

Collusion with intertemporal price dispersion

By: de Roos, NicholasSmirnov, Vladimir
Abstract: We develop a theory of optimal collusive intertemporal price dispersion. Dispersion clouds consumer price awareness, encouraging firms to coordinate on dispersed prices. Our theory generates a collusive rationale for price cycles and sales. Patient firms can support optimal collusion at the monopoly price. For less patient firms, monopoly prices must be punctuated with fleeting sales. The most robust structure involves asymmetric price cycles resembling Edgeworth cycles. Low consumer attentiveness enhances the effectiveness of price dispersion by reducing the payoff to deviations involving price reductions. However, for sufficiently low attentiveness, price rises are also a concern, limiting the power of obfuscation.

June 10, 2019 | Permalink | Comments (0)