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The B.E. Journal of Theoretical Economics

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Sellers’ Implicit Collusion in Directed Search Markets

Seungjin Han
  • Corresponding author
  • Department of Economics, 1280 Main Street West, McMaster University, Hamilton, Ontario, Canada L8S 4M4
  • Email:
Published Online: 2016-06-02 | DOI: https://doi.org/10.1515/bejte-2015-0106


This paper studies a competing-mechanism game for directed search markets in which multiple sellers simultaneously offer selling mechanisms to multiple buyers in order to compete for trading opportunities and profits. Buyers approach any particular seller via directed search, but there can be mis-coordination among buyers in the sense that they choose all the sellers offering the same mechanism with equal probability. A seller’s mechanism can be sufficiently general to make his trading price contingent on participating buyers’ messages, which may reflect changes in trading prices somewhere else. This allows sellers to sustain implicit collusion. This paper focuses on symmetric equilibria in which sellers offer the same mechanism that induces buyers’ ex-post truth telling on market information. It provides the characterization of all symmetric ex-post truth telling equilibrium allocations and comparative statics regarding the range of equilibrium prices and profits. In a large market, the probability that sellers can sell their products at collusive prices depends on the ratio of buyers to sellers.

Keywords: implicit collusion; competing mechanism; online markets; clickstream; robust equilibrium

JEL: C71; D82


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About the article

Published Online: 2016-06-02

Published in Print: 2016-06-01

Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2015-0106. Export Citation

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