Collusion Under Monitoring of Sales

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Business Economics and Public Policy Papers
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Business
Economics
Public Affairs, Public Policy and Public Administration
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Harrington, Joseph E
Skrzypacz, Andrzej
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Collusion under imperfect monitoring is explored when firms' prices are private information and their quantities are public information; such an information structure is consistent with several recent price-fixing cartels, such as those in lysine and vitamins. For a class of symmetric oligopoly games, it is shown that symmetric equilibrium punishments cannot sustain any collusion. An asymmetric punishment is characterized that does sustain collusion and it has firms whose sales exceed their quotas compensating those firms with sales below their quotas. In practice, cartels could have performed such transfers through sales among the cartel members.

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2007-06-01
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The RAND Journal of Economic
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At the time of publication, author Joseph E. Harrington Jr. was affiliated with the John Hopkins University . Currently, he is a faculty member in the Business, Economics and Public Policy Department of the Wharton School at the University of Pennsylvania.
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