Economic Theory Series No. 6 - Charley Xia (PhD Candidate, RSE, ANU)


Using fringe competition and market transparency to break collusion between Cournot intermediaries


Abstract: I study welfare outcomes in a novel institutional environment where Cournot intermediaries competing to connect a wholesale market and a retail market are able to collude under imperfect public monitoring. Introducing an additional fringe sector and two-sided public signals provide complexities for upholding tacit agreements between strategic firms. Nevertheless, a simple trigger strategy reverting back to the stage game Cournot-Nash equilibrium is optimal for the strategic sector aiming to maximise discounted expected profits. Finding a multiplicity of symmetric perfect public equilibria gives policymakers opportunities to break collusion through affecting either fringe competition or the informational environment.

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Fred Gruen Economics Seminar Room (H.W. Arndt Bldg 25A)