Measuring the effects of information exchange on incentives to collude using calibrated simulations (with an example of the South African oil industry)

Abstract

Information sharing may help firms solve the coordination and monitoring problems that threaten the sustainability of concerted practices or tacit collusion. This paper models the impact of information sharing on the incentives of firms in an oligopolistic market to sustain a concerted practice, taking into account recent theoretical developments and empirical evidence on tacit collusion. We then calibrate and simulate the effect of information sharing, mediated by the industry association, on each firm in the South African oil industry. Our analysis offers a rigorous, but also practical, framework for facilitating Competition Authorities' decision making in investigations of information sharing.