‘Collusion under Private Monitoring with Asymmetric Capacity Constraints’

On Friday 21st March 2014, the Centre welcomes the return of an old friend in the form of former CCP Research Associate and Post Doctoral Fellow Luke Garrod (Loughborough University). Luke will be presenting his paper entitled ‘Collusion under Private Monitoring with Asymmetric Capacity Constraints‘ which he has written with fellow CCP alumna Matthew Olczak (Aston University). An abstract for their article can be found below.

Abstract

We explore the effects of asymmetries in capacity constraints on collusion where demand is uncertain and where firms must monitor the agreement through their privately observed sales and prices. We show that deviations will be detected perfectly when demand fluctuations are sufficiently small. Otherwise, monitoring is imperfect and punishment phases must occur on the equilibrium path. Collusion is hindered in both cases when the largest firm has more capacity and when the smallest firm has less. We demonstrate that a merger with a collusive symmetric outcome can have a lower average best equilibrium price than a more asymmetric noncollusive outcome.

The seminar will take place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.1.

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