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The role of demand information and monitoring in tacit collusion
Author(s) -
Rojas Christian
Publication year - 2012
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2012.00157.x
Subject(s) - tacit collusion , collusion , anticipation (artificial intelligence) , action (physics) , construct (python library) , economics , microeconomics , computer science , artificial intelligence , physics , quantum mechanics , programming language
Motivated by the Green and Porter (1984) and Rotemberg and Saloner (1986) models, we construct lab experiments to test the effects of two factors on collusion: information (regarding next period's demand state) and monitoring (of a rival's past action). Results indicate that information may facilitate collusion more than monitoring, especially as subjects gain experience. A robust finding is that subjects in the Rotemberg and Saloner treatment cooperate as predicted by this theory: collusion falls dramatically in anticipation of unusually large demand and returns to high levels otherwise. These results suggest that tacit and fairly elaborate collusion could arise in stochastic environments .