Sustaining Collusion Via a Fuzzy Trigger

Sustaining Collusion Via a Fuzzy Trigger Probability theory is the standard economic representation of uncertainty, although it is not always an accurate one. Fuzzy logic is an alternative representation that does not require individual beliefs regarding the explicit functional form of uncertainty. This paper applies fuzzy logic to an oligopoly trigger pricing game. The fuzzy trigger pricing game reverses the standard cyclical price war prediction; collusion-sustaining price wars are most likely to occur during times of high demand. The fuzzy model also predicts that markets with relatively volatile prices are more likely to undergo collusion-sustaining price wars. The predictions are consistent with available empirical evidence. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Sustaining Collusion Via a Fuzzy Trigger

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007796509603
Publisher site
See Article on Publisher Site

Abstract

Probability theory is the standard economic representation of uncertainty, although it is not always an accurate one. Fuzzy logic is an alternative representation that does not require individual beliefs regarding the explicit functional form of uncertainty. This paper applies fuzzy logic to an oligopoly trigger pricing game. The fuzzy trigger pricing game reverses the standard cyclical price war prediction; collusion-sustaining price wars are most likely to occur during times of high demand. The fuzzy model also predicts that markets with relatively volatile prices are more likely to undergo collusion-sustaining price wars. The predictions are consistent with available empirical evidence.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 6, 2004

References

  • Artificial Intelligence in Economics: Truth and Dare
    Benaroch, M.

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