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Unpublished Paper
Silence is Golden: Communication, Silence, And Cartel Stability
VMI Economics Working Paper Series (2007)
  • Atin Basu Choudhary, Virginia Military Institute
  • John Conlon, University of Mississippi
Abstract

This paper studies how cartel stability is influenced by asymmetric information and communication about demand. Firms in a cartel face fluctuating demand in a repeated game framework. In each period, one randomly chosen firm knows current demand. In this context we consider two different equilibria -- one where the informed firm communicates its information to its partners and another where it does not. We show that cartels are extremely unstable when the informed firm communicates with the uninformed firms. However, when the informed firm does not communicate with the uninformed firms cartels can be as stable as when there are no demand fluctuations at all.

Keywords
  • cartel,
  • stability,
  • information,
  • communication,
  • critical interest rate,
  • trigger strategy
Disciplines
Publication Date
May, 2007
Citation Information
Atin Basu Choudhary and John Conlon. "Silence is Golden: Communication, Silence, And Cartel Stability" VMI Economics Working Paper Series (2007)
Available at: http://works.bepress.com/atinbasu/10/