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| Author: | Rotemberg, J. J. Saloner, G. |
| Title: | Collusive price leadership. |
| Journal: | Journal of Industrial Economics
1990 : SEP, VOL. 39:1, p. 93-111 |
| Index terms: | PRICE LEVEL FINANCIAL MODELS |
| Language: | eng |
| Abstract: | The pattern of pricing in which price changes are first announced by one firm and then matched by its rivals is described and analyzed. A model is presented to show that this price leadership facilitates collusion under asymmetric information. In equilibrium the leader earns higher profits than the follower. Nonetheless, if information is sufficiently asymmetric, the less informed firm prefers to follow the better informed firm, so the leader can emerge endogenously. The follower can benefit from price rigidity so that price may be changed infrequently. It is also shown that overall welfare may be lower under collusive price leadership than under covert collusion. |
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