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Open AccessArticle

Tacit Collusion under Fairness and Reciprocity

Sogang University, School of Economics, 35 Baekbeom-ro, Seoul, South Korea
University of Lausanne, Faculty of Business and Economics, Internef, 535 CH-1015, Lausanne, Switzerland
Author to whom correspondence should be addressed.
Games 2013, 4(1), 50-65;
Received: 25 September 2012 / Revised: 28 January 2013 / Accepted: 29 January 2013 / Published: 7 February 2013
This paper departs from the standard profit-maximizing model of firm behavior by assuming that firms are motivated in part by personal animosity–or respect–towards their competitors. A reciprocal firm responds to unkind behavior of rivals with unkind actions (negative reciprocity), while at the same time, it responds to kind behavior of rivals with kind actions (positive reciprocity). We find that collusion is easier to sustain when firms have a concern for reciprocity towards competing firms provided that they consider collusive prices to be kind and punishment prices to be unkind. Thus, reciprocity concerns among firms can have adverse welfare consequences for consumers. View Full-Text
Keywords: fairness; reciprocity; collusion; repeated games fairness; reciprocity; collusion; repeated games
MDPI and ACS Style

İriş, D.; Santos-Pinto, L. Tacit Collusion under Fairness and Reciprocity. Games 2013, 4, 50-65.

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