Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, March 20, 2020

Collusion, price dispersion, and fringe competition

By: de Roos, NicolasSmirnov, Vladimir
Abstract: We study the optimal behaviour of a cartel faced with fringe competition and imperfectly attentive consumers. Intertemporal price dispersion obfuscates consumer price comparison which aids the cartel through two channels: it reduces the effectiveness of free riding by the fringe; and it relaxes the cartel’s internal incentive constraints. Our theory explains the survival of a price-setting cartel in a homogeneous product market, provides a collusive rationale for sales and Edgeworth cycles, and characterises the cartel’s manipulation of its fringe rival through a double cut-off rule.
URL: http://d.repec.org/n?u=RePEc:syd:wpaper:2019-13&r=com

https://lawprofessors.typepad.com/antitrustprof_blog/2020/03/collusion-price-dispersion-and-fringe-competition.html

| Permalink

Comments

Post a comment