Collusion under monitoring of sales

Abstract

Collusion under imperfect monitoring is explored when firms' prices are private information and their quantities are public information; such an information structure is consistent with several recent price‐fixing cartels, such as those in lysine and vitamins. For a class of symmetric oligopoly games, it is shown that symmetric equilibrium punishments cannot sustain any collusion. An asymmetric punishment is characterized that does sustain collusion and it has firms whose sales exceed their quotas compensating those firms with sales below their quotas. In practice, cartels could have performed such transfers through sales among the cartel members.