Technology uncertainty and market collusion

Labrecciosa, Paola and Colombo, Luca 2010, Technology uncertainty and market collusion, The B.E. journal of economic analysis & policy, vol. 10, no. 1, pp. 1-15, doi: 10.2202/1935-1682.2401.

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Title Technology uncertainty and market collusion
Author(s) Labrecciosa, Paola
Colombo, Luca
Journal name The B.E. journal of economic analysis & policy
Volume number 10
Issue number 1
Start page 1
End page 15
Total pages 16
Publisher The Berkeley Electronic Press
Place of publication Berkeley, Calif.
Publication date 2010-01
ISSN 1935-1682
Keyword(s) antitrust policy
technology uncertainty
cartel stability
grim trigger strategies
optimal punishments
Summary In this paper, we propose technology uncertainty as a new factor relevant to market collusion. We analyze an infinitely repeated quantity game where, for each firm, the marginal productivity of the input employed in the production process is affected by an unobservable shock. Each firm faces technology uncertainty, measured by the variance of the shocks, in every period. We show that, under both grim trigger strategies and optimal punishments, technology uncertainty enhances cartel stability, suggesting that, in industries characterized by technology uncertainty, the actions of the antitrust authorities should be intensified. We also show that collusion is less likely when technology shocks are highly correlated, implying that regulators interested in deterring collusion should promote the formation of industrial clusters.
Language eng
DOI 10.2202/1935-1682.2401
Field of Research 140104 Microeconomic Theory
140209 Industry Economics and Industrial Organisation
Socio Economic Objective 910203 Industrial Organisations
HERDC Research category C1 Refereed article in a scholarly journal
HERDC collection year 2010
Copyright notice ©2010, The Berkeley Electronic Press. All rights reserved.
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Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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