Supply- vs. Demand-Side Transparency: The Collusive effects under Imperfect Public Monitoring
[Published: 10 December 2021]
Dr Matthew Olczak, along with co-author Luke Garrod, has had his article ‘Supply- vs. Demand-Side Transparency: The Collusive effects under Imperfect Public Monitoring’ published in the Journal of Industrial Economics.
Abstract
We analyse how market transparency affects collusion under imperfect monitoring where punishment phases occur on the equilibrium path. We show that increased transparency causes a ‘pro-competitive’ demand-side effect and an ‘anti-competitive’ supply-side effect on the optimal symmetric perfect public equilibrium (SPPE) profits. When transparency increases on both sides of the market, the optimal SPPE profits unambiguously increase at the perfect monitoring limit, because the pro-competitive demand-side effect vanishes. This result holds even when there is minimal structure on the competition game. The supply-side effect also dominates away from the limit under reasonable conditions. We draw conclusions for policy.
The full article can be accessed by clicking here.