Facilitating collusion by exchanging non-verifiable sales reports

Abstract

A number of collusive agreements involve the exchange of self-reported sales data between firms, which use them to monitor compliance with a target market share allocation. This paper shows that such communicationbetween competitors may facilitate collusion even if all private information becomes public after a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocationmechanisms after unexpected swings, limiting the recourse to price wars as a tool for mutual disciplining. In some cases, efficient collusion cannot occur unless firms are able to engage in such communication.