Discussion Paper Details
Please find the details for DP8877 in an easy to copy and paste format below:
Title: Flexibility and Collusion with Imperfect Monitoring
Author(s): Maria Bigoni, Jan Potters and Giancarlo Spagnolo
Publication Date: March 2012
Keyword(s): Collusion, Cooperation, Flexibility, Imperfect monitoring, Oligopoly and Repeated games.
Programme Area(s): Industrial Organization
Abstract: Flexibility - the ability to react swiftly to others' choices - facilitates collusion by reducing gains from defection before opponents react. Under imperfect monitoring, however, flexibility may also hinder collusion by inducing punishment after too few noisy signals. The combination of these forces predicts a non-monotonic relationship between flexibility and collusion. To test this subtle prediction we implement in the laboratory an indefinitely repeated Cournot game with noisy price information and vary how long players have to wait before changing output. We find that (i) the facilitating role of flexibility is lost under imperfect monitoring, and (ii) with learning, collusion unravels with low or high flexibility, but not with intermediate flexibility.
For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8877
Bigoni, M, Potters, J and Spagnolo, G. 2012. 'Flexibility and Collusion with Imperfect Monitoring'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8877