2134/27366 Luke Garrod Luke Garrod Matthew Olczak Matthew Olczak Explicit vs tacit collusion: The effects of firm numbers and asymmetries Loughborough University 2017 Cartels Tacit collusion Imperfect monitoring Capacity constraints Economics not elsewhere classified 2017-11-10 12:16:48 Journal contribution https://repository.lboro.ac.uk/articles/journal_contribution/Explicit_vs_tacit_collusion_The_effects_of_firm_numbers_and_asymmetries/9491501 In an infinitely repeated game where firms with (possibly asymmetric) capacity constraints can make secret price cuts, we analyse the incentives for explicit collusion when firms can alternatively collude tacitly. Tacit collusion can involve price wars on the equilibrium path. Explicit collusion involves firms secretly sharing their private information to avoid such price wars, but this is illegal and runs the risk of sanctions. We find that, in contrast to the conventional wisdom but consistent with some empirical evidence, illegal cartels are least likely to arise in markets with a few symmetric firms, because tacit collusion is relatively more appealing in such markets. We discuss the implications for anti-cartel enforcement policy.