Silence is Golden: Communication, Silence, And Cartel Stability

41 Pages Posted: 31 Jan 2009 Last revised: 16 Oct 2012

See all articles by Atin Basuchoudhary

Atin Basuchoudhary

Virginia Military Institute

John R. Conlon

University of Mississippi - Department of Economics

Date Written: October 16, 2012

Abstract

This paper studies how cartel stability is in‡uenced by asymmetric information and communication about demand. Firms in a cartel face fl‡uctuating demand in a repeated game framework. In each period, one randomly chosen fi…rm knows current demand. In this context we consider two different equilibria; one where the informed fi…rm communicates its information to its partners and another where it does not. We show that cartels are extremely unstable when the informed …firm communicates with the uninformed fi…rms. However, when the informed fi…rm does not communicate with the uninformed fi…rms cartels can be as stable as when there are no demand fl‡uctuations at all.

Keywords: Asymmetric Information, Demand Fluctuation, Cartel Stability

JEL Classification: L00, D82, C72

Suggested Citation

Basuchoudhary, Atin and Conlon, John R., Silence is Golden: Communication, Silence, And Cartel Stability (October 16, 2012). Available at SSRN: https://ssrn.com/abstract=1335498 or http://dx.doi.org/10.2139/ssrn.1335498

Atin Basuchoudhary (Contact Author)

Virginia Military Institute ( email )

Department of Economics and Business
Scott Shipp Hall
Lexington, VA 24450
United States
5404647450 (Phone)

John R. Conlon

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
61
Abstract Views
607
rank
486,441
PlumX Metrics