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Article: Collusion with (almost) no information.
- Article from:
- RAND Journal of Economics
- Article date:
- September 22, 2007
- Author:
CopyrightCOPYRIGHT 2007 Rand, Journal of Economics. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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We analyze noncooperative collusion in an infinitely repeated Bertrand game, where each of the n firms receives a privately observed, i.i.d, cost shock in each period and firms only (and privately) observe whether they have "won" the unit mass of consumers. No other information is available and no communication is allowed. We prove that there exist equilibria in private strategies approximating first-best profits when firms are sufficiently patient. In particular, productive efficiency obtains in the limit.
1. Introduction
* Since Stigler's (1964) seminal work, economists have recognized that enhanced information about demand or cost uncertainty may ...