Lecture 5b Cartel and Collusion _2_.pdf

Lecture 5b Cartel and Collusion _2_.pdf - Lecture 5b Cartel...

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Lecture 5b: Cartel and Collusion (2)
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Outline Use of price transparency and exchange information to sustain collusion Role of observability of prices and quantities Coordination and role of communication Pricing rules and contract that facilitate collusion Most favored nation and meeting competition clauses Resale price maintenance
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Observability of Prices and Quantities Economic theory of collusion emphasize the role of observability of prices and quantities in sustaining collusion. Observability of prices and quantities helps firms to collude by identifying deviations. Similarly exchange of information on past or current prices helps collusion as it allows to identify deviators and better target market punishment.
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