2012
DOI: 10.2139/ssrn.1986387
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The Arm’s Length Principle and Tacit Collusion

Abstract: The arm's length principle states that the transfer price between two associated enterprises should be the price that would be paid for similar goods in similar circumstances by unrelated parties dealing at arm's length with each other. This paper examines the effect of the arm's length principle on dynamic competition in imperfectly competitive markets. It is shown that the arm's length principle renders tacit collusion more stable. This is true whether firms have exclusive dealings with unrelated parties or … Show more

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Cited by 10 publications
(6 citation statements)
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“…This match, which has since come to be known as the 'Shame of Gijon', is an example of tacit collusion (Anderson et al, 2015;Fonseca and Normann, 2012;Choe and Matsushima, 2013), which has some similarities with evolving cooperation in the Iterated Prisoner's Dilemma (Axelrod, 1984;Li et al, 2011;Li and Kendall, 2014), which has been an active field of research for over 30 years, and has strong links with the pioneering work of Nash (1950Nash ( , 1951 in Game Theory.…”
Section: June 1982 -Austria Vs West Germany El Molinón Stadium Gmentioning
confidence: 99%
“…This match, which has since come to be known as the 'Shame of Gijon', is an example of tacit collusion (Anderson et al, 2015;Fonseca and Normann, 2012;Choe and Matsushima, 2013), which has some similarities with evolving cooperation in the Iterated Prisoner's Dilemma (Axelrod, 1984;Li et al, 2011;Li and Kendall, 2014), which has been an active field of research for over 30 years, and has strong links with the pioneering work of Nash (1950Nash ( , 1951 in Game Theory.…”
Section: June 1982 -Austria Vs West Germany El Molinón Stadium Gmentioning
confidence: 99%
“…7 For subsequent developments, see Nielsen et al (2008), Choe andMatsushima (2013), andYao (2013). 8 In many studies dealing with asymmetric tax rates, country asymmetry results from differences in market size (Stöwhase, 2005(Stöwhase, , 2013.…”
Section: Introductionmentioning
confidence: 99%
“…Most studies of upstream collusion focus on the incentive issue, that is, a cartel needs to ensure that no member wants to break away from the collusive agreement (Choe and Matsushima, ; Jullien and Rey, ; Piccolo and Reisinger, ; Nocke and White, , ). We, on the contrary, address the profitability issue of collusion with compensation consideration, setting aside the usual incentive constraint.…”
Section: Introductionmentioning
confidence: 99%