Impossibility of Collusion under Imperfect Monitoring with Flexible Production

2007/12/01 by Yuliy Sannikov, Andrzej Skrzypacz · 3 citations
Economics, Econometrics and Finance · Decision Sciences · #Merger and Competition Analysis #Auction Theory and Applications #Economic theories and models

paper · doi:10.1257/aer.97.5.1794

openalex publication_date 2007/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/11

Abstract

We show that it is impossible to achieve collusion in a duopoly when (a) goods are homogenous and firms compete in quantities; (b) new, noisy information arrives continuously, without sudden events; and (c) firms are able to respond to new information quickly. The result holds even if we allow for asymmetric equilibria or monetary transfers. The intuition is that the flexibility to respond quickly to new information unravels any collusive scheme. Our result applies to both a simple stationary model and a more complicated one, with prices following a mean-reverting Markov process, as well as to models of dynamic cooperation in many other settings. (JEL D43, L12, L13)

Citations

• Rules, Communication, and Collusion: Narrative Evidence from the Sugar Institute Case

Cited by

• The Role of Information in Repeated Games With Frequent Actions
• Reputation in Continuous-Time Games
• Yuliy Sannikov [wikipedia]

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