Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

3-2017

Publication Source

Research in Economics

Volume

71

Issue

1

Start Page

140

Last Page

158

DOI

10.1016/j.rie.2016.11.005

Abstract

Unlawful collusion is when firms have a mutual understanding to coordinate their behavior for the purpose of achieving a supracompetitive outcome. Given the legal focus on mutual beliefs, this paper explores the role of mutual beliefs in producing collusion. Focusing on price leadership, firms are assumed to commonly believe that price increases will be at least matched but lack any shared understanding about who will lead, when they will, and at what prices. Sufficient conditions are derived which ensure that supracompetitive prices emerge. However, price is bounded below the maximal equilibrium price.

Copyright/Permission Statement

© 2017. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

collusion, price leadership, epistemic game theory

Embargo Date

12-15-2018

Available for download on Saturday, December 15, 2018

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Date Posted: 27 November 2017

This document has been peer reviewed.