The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: May, 2008, Volume 76, Issue 3
https://doi.org/10.1111/j.1468-0262.2008.00845.x
p. 493-540
Susan Athey, Kyle Bagwell
We consider a dynamic Bertrand game in which prices are publicly observed and each firm receives a privately observed cost shock in each period. Although cost shocks are independent across firms, within a firm costs follow a first‐order Markov process. We analyze the set of collusive equilibria available to firms, emphasizing the best collusive scheme for the firms at the start of the game. In general, there is a trade‐off between productive efficiency, whereby the low‐cost firm serves the market in a given period, and high prices. We show that when costs are perfectly correlated over time within a firm, if the distribution of costs is log‐concave and firms are sufficiently patient, then the optimal collusive scheme entails price rigidity: firms set the same price and share the market equally, regardless of their respective costs. When serial correlation of costs is imperfect, partial productive efficiency is optimal. For the case of two cost types, first‐best collusion is possible if the firms are patient relative to the persistence of cost shocks, but not otherwise. We present numerical examples of first‐best collusive schemes.
This document has three parts. The first part analyzes generalizations of our model to downward-sloping demand, imperfect substitutes, Cournot competition, and nonlinear cost functions. The second part describes a general dynamic programming approach to games with serially correlated private information. The third part establishes conditions for the existence of an equilibrium with productive efficiency for perfectly persistent types, and also includes an analysis of severe "belief threat" punishments.
This document has three parts. The first part analyzes generalizations of our model to downward-sloping demand, imperfect substitutes, Cournot competition, and nonlinear cost functions. The second part describes a general dynamic programming approach to games with serially correlated private information. The third part establishes conditions for the existence of an equilibrium with productive efficiency for perfectly persistent types, and also includes an analysis of severe "belief threat" punishments.
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.
