Information Sharing 2006

In order to make the right decisions, firms need information about costs, about demand conditions and, from the firms’ point of view, about the actions that their rivals are planning. Good information will allow the firm to plan production and marketing activities, to invest in new capacity or in R&D and to price its products competitively. Similarly, consumers will be able to make rational choices if they are well informed about different products’ prices and characteristics.

On the other hand, detailed information about rivals’ prices, production and sales can help stabilize cartels, by making it easier for the cartel members to monitor each other. Less obvious though, is the fact that increased market transparency in general can make the market more collusive and raise the overall price level rather than helping consumers to make good choices.

This conference volume focuses on arrangements set up by companies for sharing information between them.

  • In the opening contribution, Richard Whish (King´s College London) discusses EC legal practice on information sharing. Following existing practice, he stresses the importance of the structure of the concerned market, the nature of the information exchanged and whether the exchanged information becomes available to the public or not.
  • Valerie Suslow (University of Michigan) and Margaret Levenstein (Michigan Census Research Data Center), in the second contribution, focus on the role of information exchange in explicit cartels. They base their conclusion on a sample of 41 international cartels fined by the EU.
  • The third contribution, by Xavier Vives (IESE Business School), discusses the theoretical insights from the economics literature on information sharing. The firms’ incentives to exchange information, as well as the welfare effects, hinges critically on a number of factors: the type of competition (simply put, price competition or quantity competition), whether the information exchange mainly reduces uncertainty over cost or demand conditions, whether the uncertainty is over industry-wide or firm-specific phenomena and the industry’s degree of concentration.
  • In the fourth contribution, Peter Møllgaard (Copenhagen Business School) and Per Baltzer Overgaard (University of Aarhus) focus on the role of transparency for effective competition – according to economic theory and as evidenced in a number of actual competition law cases on information exchanges and collusion. The theoretical literature that is surveyed suggests that improved information flows between oligopolists increases the scope for coordinated behaviour, because deviations from (tacit or explicit) collusive behaviour will be detected more quickly and with higher probability, and because uncertainty about rivals’ future intention will be reduced.
  • Christina Caffarra and Kai-Uwe Kühn (University of Michigan), in the final contribution, set out by suggesting that while private communication about planned future pricing should not be accepted, a more reasoned approach should be used vis-à-vis what they consider “information exchange”: private communication about current market information or past actions in the market. In particular, they argue that a policy of prohibiting the sharing of disaggregated data simply because it is disaggregated is too simplistic.

 

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