Centre for Competition Policy
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Working Paper 17-2
Market Transparency and Collusion under Imperfect Monitoring
AUTHORS: Luke Garrod & Matthew Olczak
ABSTRACT: We develop a general model of a simple imperfect monitoring setting to analyse how market transparency affects collusion when price wars occur in equilibrium. We show that, despite minimal structure on the competition game and despite the usual ambiguous effect on the critical discount factor, increased consumerside transparency strictly lowers the best collusive profits. In contrast, increased producer-side transparency lowers the critical discount factor and raises the best collusive profits. Placing more structure on the competition game, we analyse these counteracting effects when market transparency affects both sides of the market.
KEYWORDS: Transparency, tacit collusion, imperfect information, price wars
CITATION: Garrod, L & Olczak, M. (2017) "Market Transparency and Collusion under Imperfect Monitoring", CCP Working Paper 17-2
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