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Journal ArticleDOI

Should Private Exchanges of List Price Information Be Presumed to Be Anticompetitive?

22 May 2023-Journal of Industry, Competition and Trade (Journal of Industry, Competition and Trade)-
TL;DR: In this article , the authors consider the effect of private list price exchanges between competitors and show that both the scope for and magnitude of harm are sensitive to key modelling parameters such as the number of firms, the degree of product substitutability, and the level of marginal cost.
Abstract: Abstract Harrington (2022) provides a novel theory that explains how a private information exchange involving gross list prices can lead to higher transaction prices. On this basis, he considers that private list price exchanges between competitors should be presumed to harm competition. The theory, which has received much attention in the context of the EU trucks cartel case, was recently referred to by the UK Competition Appeal Tribunal as a “unilateral effects” theory, given that it involves no coordination once list prices have been exchanged. Unlike conventional collusion, the theory does not rely on a monitoring and retaliation mechanism. Given its novelty and relevance for recent competition cases, we consider it useful to explore its potential limitations. We show that both the scope for and magnitude of harm are sensitive to key modelling parameters such as the number of firms, the degree of product substitutability, and the level of marginal cost—sometimes in opposite directions. We also show that there may be no scope for the anticompetitive effect when firms are capacity constrained. Finally, we discuss several additional qualitative aspects that may undermine the theory of harm: the adaptability of internal pricing processes over time, the lack of verifiability of exchanged list price information (especially when the exchange is private), and possible procompetitive or competitively neutral reasons for the conduct. We conclude that, although Harrington provides an insightful addition to the wider literature on the competitive effects of information exchanges, the effects of list price exchanges are not sufficiently unambiguous to justify a general presumption of competitive harm.
References
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Journal ArticleDOI
TL;DR: In this paper, the authors examine the nature of cartel self-enforcement in the presence of demand uncertainty and present a model of a non-cooperatively supported cartel, and the aspects of industry structure which would make such a cartel viable.
Abstract: Recent work in game theory has shown that, in principle, it may be possible for firms in an industry to form a self-policing cartel to maximize their joint profits. This paper examines the nature of cartel self-enforcement in the presence of demand uncertainty. A model of a noncooperatively supported cartel is presented, and the aspects of industry structure which would make such a cartel viable are discussed.

2,024 citations

Journal ArticleDOI
TL;DR: In this paper, a non-cooperative equilibrium concept for super games is presented, which fits John Nash's noncooperative solution and also has some features resembling the Nash cooperative solution.
Abstract: Presents a non-cooperative equilibrium concept, applicable to supergames, which fits John Nash's non-cooperative equilibrium and also has some features resembling the Nash cooperative solution. Description of an ordinary game; Definition and discussion of a non-cooperative equilibrium for supergames; Description of supergame and supergame strategies; Information on the Cournot strategy.

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Journal ArticleDOI
TL;DR: It is shown that all tractable versions of the model used in practice are (almost) identical and have a mean-variance structure.

30 citations

Journal ArticleDOI
TL;DR: In this article, the authors present a theory of harm suggesting that a combination of anchoring, orientation on reference points, and loss aversion may render list price collusion effective in raising transaction prices.
Abstract: Firms sometimes collude by agreeing on increases in list prices. Yet, the efficacy of such list price collusion is subject to discussion as colluding firms might, in principle, deviate secretly from the elevated prices by granting their customers discounts. This article reviews cases of list price collusion in the USA and Europe, and it presents a theory of harm suggesting that a combination of anchoring, orientation on reference points, and loss aversion may render list price collusion effective in raising transaction prices—even if firms set transaction prices in a non-coordinated fashion.

8 citations