Cartelization under present bias and imperfect public signals
Bibliographic Data
| ID | 11285457 |
|---|---|
| Authors | Long Cheng (0000-0003-4432-5264, Shandong University of Finance and Economics), Stuart McDonald (0000-0001-6561-1927, University of Nottingham Ningbo China), Guangliang Ye (0000-0002-7501-6432, Hainan University, corresponding author) |
| Year | 2023 |
| Volume | 123 |
| Pages | 77-86 |
| Publication date | 2023-05-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Mathematical Social Sciences (JOURNAL) |
| Journal identifiers | ISSN: 0165-4896 • E-ISSN: 1879-3118 |
| Publisher | Elsevier BV (PUBLISHER) |
| DOI | 10.1016/j.mathsocsci.2023.01.004 |
| OpenAlex | W4323275748 |
| Language | EN |
| References cited | 28 |
This paper explores the impact of present bias on trigger pricing strategies that are used to support a cartel in a market where firms can only observe a noisy price signal. The present bias of firm management is modelled by using quasi-hyperbolic discounting that the discount factor between the present and next period is βδ, and between any two adjacent periods later it is δ. We demonstrate that there is a threshold value β̲(δ), which is decreasing in δ. For β≥β̲(δ), we show that there exists a Nash reversion trigger strategy for the cartel, featuring lower prices, higher outputs and longer periodic price wars. As a consequence, the trigger price, which is shown to be proportional to the cartel price, is always lower than that in the Green-Porter model
Cartel · Collusion · Discounting · Econometrics · Economics · Imperfect · Microeconomics · Monetary economics · Nash equilibrium · Statistics · Value (mathematics · Consumer Market Behavior and Pricing · Economic theories and models · Mathematics · Merger and Competition Analysis
| Highly cited | No |
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