35 Pages Posted: 1 Dec 2015 Last revised: 12 Mar 2017
Date Written: February 16, 2017
We adapt the framework of Spiegler (2016) to examine the effect of limited product comparability on the viability of collusion. Firms choose messages to influence the propensity of consumers to compare products. The cartel hinders transparency on the equilibrium path, and seeks it for optimal punishment. We provide four conditions, each sufficient to ensure obfuscation aids collusion: if firms can mix over messages or commit to messages, if messages are informative, or if the cartel can collectively control comparability. We also analyse the role of message differentiation and complexity for optimal messages and for the sustainability of collusion, and argue that obfuscation is more effective when message differentiation is important for comparability.
Keywords: Collusion, frame competition, obfuscation
JEL Classification: L13, D83
Suggested Citation: Suggested Citation