The Power of Communication
- (pp. 3737-51)
Abstract
In this paper, I offer two ways in which firms can collude: secret monitoring and infrequent coordination. Such collusion is enforceable with intuitive communication protocols. I make my case in the context of a repeated Cournotoligopoly with flexible production, prices that follow a Brownian motion and no monetary side payments, an environment where it has previously been argued that any collusion is impossible. Trade associations can easily facilitate collusion by mediating communication amongst firms.Citation
Rahman, David. 2014. "The Power of Communication." American Economic Review, 104 (11): 3737-51. DOI: 10.1257/aer.104.11.3737Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- L12 Monopoly; Monopolization Strategies
- L13 Oligopoly and Other Imperfect Markets