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Collusion with Limited Product Comparability

35 Pages Posted: 1 Dec 2015 Last revised: 24 Nov 2017

Nicolas de Roos

University of Sydney

Date Written: November 23, 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 five conditions, each sufficient to ensure obfuscation aids collusion: if firms can mix over messages or commit to messages, if messages are informative, or if an individual firm or the cartel as a whole can control comparability. We also analyse the impact of message differentiation and complexity for optimal messages, and identify a key role for the convexity or concavity of comparison probabilities in these features.

Keywords: Collusion, frame competition, obfuscation

JEL Classification: L13, D83

Suggested Citation

de Roos, Nicolas, Collusion with Limited Product Comparability (November 23, 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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