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Collusion with Limited Product Comparability

35 Pages Posted: 1 Dec 2015 Last revised: 12 Mar 2017

Nicolas de Roos

University of Sydney

Date Written: February 16, 2017

Abstract

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

de Roos, Nicolas, Collusion with Limited Product Comparability (February 16, 2017). Available at SSRN: https://ssrn.com/abstract=2696540 or http://dx.doi.org/10.2139/ssrn.2696540

Nicolas De Roos (Contact Author)

University of Sydney ( email )

University of Sydney
Sydney NSW 2006, NC
Australia

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