How is cooperation/collusion sustained in repeated multimarket contact with observation errors?

Atsushi Iwasaki, Tadashi Sekiguchi, Shun Yamamoto, Makoto Yokoo

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

This paper analyzes repeated multimarket contact with observation errors where two players operate in multiple markets simultaneously. Multimarket contact has received much attention from the literature of economics, management, and information systems. Despite vast empirical studies that examine whether multimarket contact fosters cooperation/collusion, little is theo-retically known as to how players behave in an equilibrium when each player receives a noisy observation of other firms' actions. This paper tackles an essentially realistic situation where the players do not share common information; each player may observe a different signal (private monitoring). Thus, players have difficulty in having a common understanding about which market their opponent should be punished in and when punishment should be started and ended. We first theoretically show that an extension of 1-period mutual punishment (IMP) for an arbitrary number of markets can be an equilibrium. Second, by applying a verification method, we identify a simple equilibrium strategy called "locally cautioning (LC)" that restores collusion after observation error or deviation. We then numerically reveal that LC significantly outperforms IMP and achieves the highest degree of collusion.

Original languageEnglish
Title of host publicationSequential Decision Making for Intelligent Agents - Papers from the AAAI 2015 Fall Symposium, Technical Report
PublisherAI Access Foundation
Pages46-53
Number of pages8
VolumeFS-15-06
ISBN (Electronic)9781577357520
Publication statusPublished - Jan 1 2015
EventAAAI 2015 Fall Symposium - Arlington, United States
Duration: Nov 12 2015Nov 14 2015

Other

OtherAAAI 2015 Fall Symposium
CountryUnited States
CityArlington
Period11/12/1511/14/15

Fingerprint

Information systems
Economics
Monitoring

All Science Journal Classification (ASJC) codes

  • Engineering(all)

Cite this

Iwasaki, A., Sekiguchi, T., Yamamoto, S., & Yokoo, M. (2015). How is cooperation/collusion sustained in repeated multimarket contact with observation errors? In Sequential Decision Making for Intelligent Agents - Papers from the AAAI 2015 Fall Symposium, Technical Report (Vol. FS-15-06, pp. 46-53). AI Access Foundation.

How is cooperation/collusion sustained in repeated multimarket contact with observation errors? / Iwasaki, Atsushi; Sekiguchi, Tadashi; Yamamoto, Shun; Yokoo, Makoto.

Sequential Decision Making for Intelligent Agents - Papers from the AAAI 2015 Fall Symposium, Technical Report. Vol. FS-15-06 AI Access Foundation, 2015. p. 46-53.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Iwasaki, A, Sekiguchi, T, Yamamoto, S & Yokoo, M 2015, How is cooperation/collusion sustained in repeated multimarket contact with observation errors? in Sequential Decision Making for Intelligent Agents - Papers from the AAAI 2015 Fall Symposium, Technical Report. vol. FS-15-06, AI Access Foundation, pp. 46-53, AAAI 2015 Fall Symposium, Arlington, United States, 11/12/15.
Iwasaki A, Sekiguchi T, Yamamoto S, Yokoo M. How is cooperation/collusion sustained in repeated multimarket contact with observation errors? In Sequential Decision Making for Intelligent Agents - Papers from the AAAI 2015 Fall Symposium, Technical Report. Vol. FS-15-06. AI Access Foundation. 2015. p. 46-53
Iwasaki, Atsushi ; Sekiguchi, Tadashi ; Yamamoto, Shun ; Yokoo, Makoto. / How is cooperation/collusion sustained in repeated multimarket contact with observation errors?. Sequential Decision Making for Intelligent Agents - Papers from the AAAI 2015 Fall Symposium, Technical Report. Vol. FS-15-06 AI Access Foundation, 2015. pp. 46-53
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