Collusion in dynamic Bertrand oligopoly with correlated private signals and communication
type: Item
instance of: scholarly article
title: Collusion in dynamic Bertrand oligopoly with correlated private signals and communication
zbMATH Open document ID: 1021.91017
author: Masaki Aoyagi
published in: Journal of Economic Theory
publication date: 2002-07-04T00:00:00Z
review text: A collusion in the repeated Bertrand oligopoly when firms observe stochastic demands for their own product only is considered earlier in a seminal paper by \textit{G. Stigler} [A theory of oligopoly. J. Political Econ. 72, 44-61 (1964)]. Collusion is hard to sustain in such an environment as no coordination device exists for punishing ``secret price-cutting''. The paper studies collusion in the repeated Bertrand oligopoly when stochastic demand levels for the product of each firm are their private information and are positively correlated. This paper extends the analysis of communication in repeated games with private monitoring when the firms' private signals are correlated conditional on each price profile. Correlation of private signals is a distinguishing feature of this paper and gives rise to a very simple grimm-trigger collusion scheme based on a logic entirely different from that used by the other authors. The above-mentioned analysis is then applied to a model where the demand signal has multiple random components with respond differently to price deviations. It is shown that the above sufficient conditions in the model hold if idiosyncratic noise terms are sufficiently small.
reviewed by: Sergei Georgievich Zhuravlev
Mathematics Subject Classification ID: 91B26
Mathematics Subject Classification ID: 91A20
zbMATH DE Number: 1763752
zbMATH Keywords: private monitoring
zbMATH Keywords: correlation
zbMATH Keywords: repeated game
zbMATH Keywords: secret price cutting
MaRDI profile type: Publication
OpenAlex ID: W2090715250
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DOI: 10.1006/JETH.2000.2711
description: scientific article; zbMATH DE number 1763752