Browsing by Subject "Collusion"

Now showing 1 - 2 of 2

Consumer prices : effects of learning algorithms and pandemic-related policy measures
(2023) Buchali, Katrin; Schwalbe, Ulrich
When it comes to product prices, two major topics have dominated the public debate in recent years: One is pricing with the help of artificial intelligence, and the other is the price level, which has risen more than usual with the onset of the COVID-19 pandemic. Higher prices create a loss of consumer surplus and possibly total welfare, which is the reason this topic has become ubiquitous in political discussions. This dissertation contributes to the debate by extending the existing literature on algorithmic pricing, which is said to facilitate personalized pricing, as well as collusive behavior and to enhance the general understanding of how government measures enforced during the COVID-19 pandemic contributed to (short-time) price developments. Thereby, the first part of the thesis addresses the concern that tacit collusion might occur if firms employ learning algorithms, as several simulation studies have demonstrated that algorithms using reinforcement learning are able to coordinate their pricing behavior and, as a result, achieve a collusive outcome without having been programmed for it. We discuss several conceptual challenges as well as challenges in the real-world application of algorithms and show by or own simulations that resulting market prices strongly depend on the type of algorithm or heuristic that is used by the firms to set prices. In the subsequent part of the thesis we examine how a self-learning pricing algorithm performs when faced with inequity-averse consumers. From our simulations we can conclude that consumers sense of fairness, which have prevented firms from engaging in price discrimination in the past years, can be incorporated into firms pricing decisions with the help of learning algorithms, making differential pricing strategies more feasible. The discussion surrounding the above-average price levels in many countries during the COVID-19 pandemic is extended in the third part of the thesis. We present empirical evidence for the impact of government-imposed restrictions and, as a consequence of their enforcement, reduced mobility on consumer prices during the COVID-19 pandemic. We show that the stringency of government measures had a positive and significant impact on consumer prices mainly in the food sector, which means that more stringent measures induced higher consumer prices in these categories.
On collusive behavior - models of cartel formation, organizational structure, and destabilization
(2011) Fischer, Julia; Schwalbe, Ulrich
This dissertation contributes to the theoretical literature on cartel formation, organizational structure, and destabilization in Cournot competitive markets. Cartel formation in Cournot competitive markets may take place as a sequential process even if the merger paradox applies. This conclusion was reached after giving up the assumption of symmetric information in cartel formation processes: it is assumed that outside firms are not informed about new cartel agreements and face a time lag by adjusting to changing behavior of some of the market participants. Furthermore, an extension to the standard cartel stability models is presented to capture the influence of communication and organizational structure in a cartel by modeling cartels as social networks. Despite the fact that communication in cartels is costly because contacts between members might be detected by antitrust authorities, it is shown that intensive contacts are possibly stabilizing within a cartel. Both aspects, the costs and benefits of communication in cartels, contribute to the players' valuation of collusion and therefore change cartel stability conditions. Additionally, this model accounts for the influence of leniency programs and fines. A theoretical explanation is given for differences between explicit and tacit collusion on the basis of this network model. Additionally, this dissertation examines whether collusive behavior might be deterred in vertical structures if dominant firms are allowed to apply specific discount schemes. It is shown that the profit maximizing behavior of a monopolistic upstream firm might lead to the deterrence of collusive behavior of downstream firms if the upstream firm is allowed to implement all-units discount schemes. All-units discounts, despite the fact that they are sometimes considered anticompetitive, possess welfare improving effects that are not generally shared by other pricing schemes.