‘Guaranteed lowest prices: do they facilitate collusion?’: Revisited
Journal Title: Economic Research-Ekonomska Istraživanja - Year 2018, Vol 31, Issue 1
Abstract
We examine the effect of guaranteed lowest price clauses (G.L.P.). First, we correct the proof of Logan and Lutter’s main result that it is the unique equilibrium outcome for firms adopting G.L.P. to charge collusive prices in a simultaneous pricing game, if one uses the trembling-hand perfect equilibrium as the solution concept. Second, we extend their argument to a sequential pricing game in which one firm chooses its price before the other, given that both firms adopt G.L.P. We show that collusive prices is the unique equilibrium outcome in this game even without resorting to any stringent refinement like the trembling-hand perfect equilibrium.
Authors and Affiliations
Jeong-Yoo Kim, Joon Yeop Kwon
Keywords
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- EP ID EP543056
- DOI 10.1080/1331677X.2018.1456352
- Views 61
- Downloads 0
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