Global Competition Among the Few

FS I V 96 - 6

Global Competition Among the Few

H orst Albach

May 1996

ISSN N r. 0722 - 6748

Forschungsschwerpunkt Marktprozeß und Unter nehmensentwicklung Research Unit

Market Processes and Corporate Development

Zitierweise/Citation:

Horst Albach, Global Com petition Among the Few, Discussion Paper FS IV 96 - 6, W issenschaftszentrum Berlin, 1996.

Wissenschaftszentrum Berlin fur Sozialforschung gGmbH, Reichpietschufer 50, 10785 Berlin, Tel. (030) 2 54 91 - 0

Global Competition Among the Few

This paper analyzes the oligopoly problem. Economic theory suggests that in a narrow oligopoly the probability o f tacit collusion is high. The firms are therefore treated as if they acted in restraint o f competition regardless o f whether they tacitly colluded or whether they acted independently. This study shows firstly, that narrow oligopoly is the outcome o f competitive strategies o f the firms. Secondly, that treating the narrow oligo­

poly as a quasimonopoly destroys any chance o f competitive advantages from narrow oligopoly.

The following conclusions can be drawn from this study:

1. N arrow oligopoly is and will be the most pervasive market structure in global compe- tion.

2. The Fellner assumption that in a narrow oligopoly implicit agreements will prevail, i.e.

that the few firms in that market will collude has to be rejected.

3. On global markets the probability o f competition among the few is higher than on local markets.

4. Competition among the few on global markets is price competition and innovation competition.

5. This is the result o f global competitive strategies for experience effects a n d for repu­

tation .

6. Information exchange systems with rival identification are pro-competitive. They im­

prove the competitive strategies o f firms in a narrow oligopoly.

7. The competitive strength o f European firms competing on global markets depends on their innovativeness and their efficiency. Antitrust policy has to foster the competitive strength o f firms. This requires a fresh look o f European antitrust policy makers at competition among the few in general and at information exchange systems in particu­

lar.

Globaler W ettbewerb zwischen Wenigen

Gegenstand dieser Analyse ist der Wettbewerb au f einem Oligopolmarkt. Die ökonomi­

sche Theorie unterstellt, daß in einem engen Oligopol die Wahrscheinlichkeit stillschwei­

genden abgestimmten Verhaltens hoch ist. Bei den Unternehmen wird daher unterstellt, daß sie sich weniger wettbewerblich verhalten, unabhängig davon ob säe stillschweigend Zusammenarbeiten oder ihre Entscheidungen unabhängig voneinander treffen. In diesem Beitrag wird erstens gezeigt, daß das enge Oligopol das Ergebnis der Wettbewerbsstra- tegäe der Unternehmen ist. Falls das enge Oligopol als ein Quasimonopol behandelt wird, so wird zweitens gezeigt, daß alle Chancen zunichte gemacht werden, die W ettbewerbs­

vorteile enger Oligopole zu nutzen.

Folgende Schlußfolgerungen lassen sich ziehen:

1. Enge Oligopole sind und werden auch zukünftig die bestimmende M arktstruktur im globalen Wettbewerb sein.

2. Die Annahme von Fellner, daß in einem engen Oligopol implizierte Vereinbarungen bestehen, d.h. daß die wenigen Unternehmen in diesem M arkt abgestimmtes Verhalten aufzeigen, wird zurückgewiesen.

3. A uf globalen M ärkten ist die Wahrscheinlichkeit, daß Wettbewerb zwischen Wenigen besteht, größer als auf lokalen Märkten.

4. Wettbewerb zwischen wenigen Unternehmen au f globalen M ärkten ist Preiswettbe­

werb und Innovationswettbewerb.

5. Dies ist das Ergebnis globaler Wettbewerbsstrategien, die au f Erfahrungseffekte und auf Reputationseffekte abzielen.

6. Marktinformationssysteme mit der Möglichkeit, W ettbewerber zu identifizieren, for­

dern den Wettbewerb insbesondere im engen Oligopol.

7. Die Wettbewerbsstärke europäischer Unternehmen für den Wettbewerb au f globalen M ärkten hängt von ihrer Innovationsfähigkeit und ihrer Effizienz ab. W ettbewerbs­

politik hat die Wettbewerbsstärke von Unternehmen zu fördern. Dies erfordert bei den Trägern der europäischen Wettbewerbspolitik eine neue Betrachtung der grundsätzli­

chen Frage des Wettbewerbs zwischen Wenigen und im speziellen der Rolle von Marktinformationssystemen.

by Horst Albach

A. Strategies of Global Players

In 1949 William Fellner published a book “Competition Among the Few”1. In this book he advanced the idea that “modern economies are exceedingly likely to ex­

perience further concentration which is profitable merely to narrow groups, and pays mostly, if not exclusively, by way of the market power which it conveys”2.

He suggested that on such oligopolistic markets equilibrium is reached not by cartel agreements but by implicit bargaining. The bargaining process leads to what Fellner called “implicit agreements”. Thus, concentration leads to monopo­

lization. This was a most disturbing result: Monopolization means exploitation of the customer. Monopolization is the opposite of the conditions that Adam Smith had found to be the roots of the wealth of Nations: Division of labor and coordi­

nation by competition among the Many! Competition among the Few thus destroys the well-being of society today and in the future the oligopoly problem thus constitutes a serious problem for theory and policy!

Fellner’s analysis raised two questions:

1. Do oligopolistic markets necessarily lead to monopolization?

2. Can monopolization be sustained if the agreements reached between the oligopolists are of an implicit nature only?

Fellner gave two reasons for his affirmative answer to the first question3:

1. Modern technologies offer “real cost advantages of size”4

2. Exclusive rights enjoyed by oligopolists act as entry barriers to smaller entrants5.

Fellner did not treat the second question. This question was taken up by George Stigler in 19646. In his “Theory of Monopoly” he showed that it may be profitable

1 Fellner, William: Competition Among the Few, Reprints of Economic Classics, New York 1965.

2 ibid., p. VIII.

3 Case 3: where an outside agency organizes an atomistic group into a quasi-oligopolistic or even quasi-monopolistic group is not of interest here.

4 ibid. p. 48.

5 ibid. p. 44.

6 Stigler, George: A Theory of Monopoly, in: Journal of Political Economy, vol. 44 (1964), p. 72.

for an oligopolist to defect from the implicit agreement. The other oligopolists then face a choice. They can either act competitively as well or they can try to punish the defector. If the punishment is severe enough and if the defector knows about the possibility of being punished, he may not find it profitable to defect in the first place. George Stigler was of the opinion that it is too difficult and costly for the oligopolists to inflict punishment on the defector. Therefore, he arrived at the conclusion that monopolization cannot be sustained in oligopoly7.

Stigler’s reassuring view of the oligopoly problem did not go unrefuted. In 1965 Erhard Kantzenbach distinguished between the intensity of potential and of actual competition. He argued: “The smaller the number of competitors on a market, the greater the potential intensity of competition. However, the smaller the number of competitors, the greater the tendency to restrain competition and the greater the possibilities to do so; the lower, therefore, the actual intensity of competition8. This led him to distinguish between narrow oligopoly and wide oligopoly. His analysis was strong support for the Stigler result: monopolization cannot be sustained in the wide oligopoly. At the same time, it supported the Fellner argument for the narrow oligopoly: “In the narrow oligopoly moderate forms of competition prevail which are basically restraints of trade”9.

Reinhard Selten underscored the importance of distinguishing between the narrow and the wide oligopoly. He showed formally that in the narrow oligopoly the probability of collusion is high and that it drops significantly in the wide oligopoly10. In the narrow oligopoly detection of a defector from an implicit agreement to collude is easier than in wide oligopoly. Punishing the defector is less costly. The punishment can be properly targeted and is, therefore, less costly to the other oligopolists. The oligopoly problem rose from Selten’s analysis in new and greater importance: Except for maybe short price wars11 there is no competi­

tion in narrow oligopolies12.

7 In 1959, Alfred Ott stated: “The smaller the number o f competitors on one side of the market, the more intensive the antagonistic relationships, the more intensive competition between the rivals in the market”. Ott, Alfred E.: Marktform und Verhaltensweise, Stuttgart 1959, p. 46.

8 Kantzenbach, Erhard: Die Funktionsfähigkeit des Wettbewerbs, Göttingen, 2. Auflage 1967, p.

90 f.

9 ibid., p. 46.

10 Selten, Reinhard: A Simple Model of Imperfect Competition where 4 Are Few and 6 Are Many, in: International Journal of Game Theory 1973 (December), pp. 141-201.

11 See, for an empirical analysis o f price wars in the Westphalian Cement Industry: Spenner, Dirk: Preiskampf und Wettbewerb in der Rheinisch-Westfälischen Zement-industrie, Ph.D.- Dissertation, Vallendar (WHU) 1995.

12 Friedman, J.: A Non-Cooperative Equilibrium for Supergames, in: Review o f Economic Studies, vol. 28 (1971), pp. 1-12 proved the dominance of the cooperative solution in infinitely repeated

In his presidential address at the European Economic Association Conference in Prague 1995 Louis Phlips argued13 14 that collusive behavior of the oligopolists is indistinguishable from independent cooperative behavior. Insight into the market structure of a narrow oligopoly makes the firms independently adopt strategies the outcomes of which are indistinguishable from the outcomes of a cartel agreement or of tacit collusion. Louis Phlips seems to assume that if the market outcome in a narrow oligopoly can be proved to be the result of independ­

ent action of the rivals, they cannot be prosecuted by the antitrust authorities^.

However, it should be remembered that in the preface to the 1960 printing of William Fellner’s book he suggested that unless the rivals in a narrow oligopoly prove that the market outcome is equivalent to the “as-if-efficient-competition”, they should be held liable for restraint of trade15. This view is shared by the European antitrust authorities.

I therefore conclude: The oligopoly problem persists. Economic theory suggests that in a narrow oligopoly the probability of tacit collusion is high. The firms are therefore treated as if they acted in restraint of competition regardless of whether they tacitly colluded or whether they acted independently.

In what follows I will first show that the narrow oligopoly is the outcome of com­

petitive strategies of the firms. Secondly, I will show that treating the narrow oligopoly as a quasi-monopoly destroys any chance of competitive advantages from narrow oligopolies.

games. Aumann and Shapley generalized Friedman’s result: Aumann, R., Shapley, L.: Long Term Competition: A Game Theoretic Analysis, mimeo 1976, quoted from Tirole, Jean: The Theory of Industrial Organization, Cambridge, Mass., and London 1988, p. 247. Reinald Krüger repeated the conclusion from the analysis of repeated games that collusive behavior is rational. Krüger, Reinald: Kollektive Marktbeherrschung und neue Industrieökonomik, in: Kruse, Jörn, and Mayer, Otto G. (eds.): Aktuelle Probleme der Wettbewerbs- und Wirtschaftspolitik, Volume honoring Erhard Kantzenbach on the ocassion of his 65th birthday, Baden-Baden 1996, pp. 135- 154. Recently Güth and Kliemt have shown that the non-cooperative strategy is the only asymptotically convergent equilibrium strategy. They warned: “At a closer look the conclusion from the folk theorem drawn by many social theorists that a theory o f social cooperation can be based on rational strategic behavior of individuals is indeed highly questionable”. See Güth, Werner, and Kliemt, Hartmut: Elementare spieltheoretische Modelle sozialer Kooperation.

Discussion Paper - Economic Series - No. 51, Humboldt-University, Berlin 1995, p. 47.

13 Phlips, Louis: On the Detection of Collusion and Predation, in: EUI-Working Paper ECO No.

95/35, European University Institute Florence, Badia Fiesolana, San Domenico, November 1995, p. 8.

14 ibid., p. 24.

15 Fellner, William: Competition Among the Few, loc. cit., p. VIII.

II. Narrow Oligopoly and Competitive Strategies 1. Global Competitive Strategies

What are the global competitive strategies of firms? Traditional economic theory has focused on pricing strategies and sales volume (quantity) strategies.

Erhard Kantzenbach strongly emphasized innovation strategies as an element of dynamic competition. He also mentioned reserve capacity as a determinant of oligopolistic interdependence16. We therefore add investment strategies as an element of global competition between firms. These four strategies are closely connected with the factors that according to Fellner are responsible for narrow oligopolies. Capacity and quantity strategies are clearly connected with his real cost advantages. We talk here of higher efficiency in the narrow oligopoly. Inno­

vation and pricing strategies assume heterogeneous products. New products differing from existing ones are based on research and development. R&D- expenses are incurred only if there is a chance of receiving higher profits. With­

out exclusive rights to sell these new products, higher profits may be challenged by free riders and imitators. Therefore, we will associate pricing and innovation strategies with the exclusive rights in Fellner’s analysis.

2. Global Competitive Advantage through Real Cost Advantages Today’s markets are global markets. Competition is global competition. This does not mean that there are no local products and local markets. But globalization permeates our life to an extent that even local products and local markets are affected.

Globalization is the result of three distinct developments.

Information Transportation Miniaturization.

Information distributes knowledge of new research results, new consumer trends, new products all over the world, at least all over the industrialized world.

Transportation has made fast global distribution of practically any product and service possible. Global sourcing is a widely practiced form of purchasing.

16 Kantzenbach, Erhard, loc. cit., p. 40 f.

Miniaturization of products and components facilitates world-wide transporta­

tion. Miniaturization means more customer satisfaction per kilogram of materi­

als. The hearing tubes that Ludwig van Beethoven used during his period of beginning deafness were much heavier than modern hearing aids and less effec­

tive. A pacemaker equipped with batteries of the early 20th century would leave no room in the chest for the lungs.

Globalization thus means that a product can be produced anywhere in the world and transported to any place of demand in the world competitively. However, once installed, a capacity cannot easily be moved to another location. Therefore, real cost advantages depend essentially on two factors:

Size and Experience of the firm.

2.1 Size Effects

The size effects on competition have been in the foreground of market analyses.

Eugen Schmalenbach in 1949 went as far as to conclude that the size effects would destroy all competition. He entitled his book “In Memory of Free Market Economy”17.

We can generalize Schmalenbach’s analysis and ask what number of firms a market can sustain, given a certain market size and a certain technologically determined size advantage. Let market size be defined by the inverse of the slope of the market demand curve and let size effects be measured by the ratio of fixed costs to margin. If we assume that entry to that market would stop when profits drop to zero, we find that the maximum number of firms that the market can sustain increases with market size and decreases with size effects. Furthermore, the smaller the product advantages measured by the margin of the product, the smaller the number of firms that the market can sustain.

Globalization increases market size. This tends to increase the number of competitors that can survive on a market. On the other hand, technical progress, particularly rising R&D expenses, increase size effects. This tends to reduce the

17 Schmalenbach, Eugen: Der freien Wirtschaft zum Gedächtnis, 1st ed. Cologne and Opladen 1949, 3rd ed. Cologne and Opladen 1958. For a recent discussion of Schmalenbach’s renowned book see von Weizsäcker, Carl-Christian: Der Wettbewerb der Unternehmensgrößen - Eine evolutorische Perspektive, in: Bühner, Rolf, Haase, Klaus Dittmar, Wilhelm, Jochen (eds.): Die Dimensionierung des Unternehmens, Stuttgart 1995. pp. 23-43.

number of competitors. There is a high probability that narrow oligopoly is the result of the two effects combined.

Several years ago I analyzed the impact of market size on the number of viable firms in the German and the Dutch markets for Anti-Hyperuricaemic drugs.

These are ethical drugs which are prescribed against gout18. With the improve­

ment in the identification of gout as distinct from rheumatic diseases, the number of patients increased significantly in Germany. It rose from 5.000 in 1967 to 130.000 in 1973 and to 261.000 in 1975. As a consequence, the number of pharmaceutical firms on the market increased from 3 in 1967 to 8 in 1973 and 17 in 1975. Market structure thus changed from a narrow oligopoly to a fairly wide oligopoly. By contrast, the number of patients in the Netherlands increased from 2.000 to 6.000 only. This allowed for a number of firms that increased from 4 to 6: certainly a narrow oligopoly. The sales per patient on the other hand remained fairly constant over time and did not differ between Germany and the Nether­

lands. This shows that potential entry kept the number of firms on the market close to what viable size allowed. Size effects alone do not seem to account for the prevalence of narrow oligopolies on today's global markets.

2.2 Experience Effects

Let us, therefore, now take up the experience effects. Experience is gained by production. The higher the cumulative sales volume, the greater the experience effects and the lower the real production costs per unit. The long-term real production costs per unit are called the experience curve. By “riding down the experience curve” the firm tries to maintain a cost advantage over competitors that follow with competing products. The larger the market, the greater the potential experience curve advantages of the first mover. Global competition is, therefore, competition to be the first on the market with a new product and to gain experience curve advantages from selling large volumes globally.

Michael Spence in 1981 analyzed the impact of the learning curve on the structure of a market for homogenous goods over time19. He assumed exogenous entry times, thus allowing for asymmetric costs per unit of output of the competi­

tors. Further, he assumed a constant elasticity demand function. He came to the conclusion that under practically any circumstances the number of firms that

18 Albach, Horst: Pricing Behaviour and Competition on the Market for Anti-Hyperuricaemic Drugs 1967-1975, Expert Opinion for the Wellcome Foundation Ltd., London, Bonn 1977.

19 Spence, Michael: The Learning Curve and Competition, in: Bell Journal of Economics, vol. 12 (1981), pp. 49-70.

enter the market and can expect to make above zero profits is rather limited. It is a narrow oligopoly. In particular: The viable number of firms increases with the size of the learning effect. The greater the growth rate of demand, the greater the number of firms and the more aggressive the entrants on the market. Interest­

ingly, the higher the price elasticity of demand, the smaller the number of oligopolists. Spence concludes inter alia: “With moderately rapid learning and a sensible range of time horizons, entry ceases typically with three or four firms”20.

In his view this market structure does, however, not pose a serious oligopoly problem: “With three or four firms who are actually competing (i.e.: not collud­

ing), performance is acceptable. By that I mean that the surplus loss relative to the optimum is not large in percentage terms”21. However, he warns that “these kinds of conclusions are very preliminary”22. And, in particular, he assumes that they compete and therefore assumes away the Fellner problem of collusion, of implicit agreements.

Jin and I have developed a model which assumes price competition rather than quantity competition as does Spence23. The firms produce symmetrically differ­

entiated goods. The demand function for each product is linear and depends on the volume of all the products in the market.

In introducing experience effects into the cost curve we distinguish two learning effects: A private learning effect which is based on cumulative individual output, and an industry learning effect which depends on cumulative industry output.

We also assume that private learning becomes known to competitors and can be imitated by them.

The results of our model are even stronger than those of Spence. In our model of price competition, the number of viable firms in the market is significantly smaller than under quantity competition. Narrow oligopolies are even more likely in case the firms compete with heterogeneous products. This, however, is the realistic case in a dynamic economy with innovation. The results of the model can be summarized in more detail. The higher the individual learning rate or experience effect, the greater the asymmetry of costs and the smaller the number of firms that can survive in the market. This result contradicts the findings of the Spence model. The greater the rate of imitation of individual learning, the

20 ibid., p. 62.

21 ibid., p. 68.

22 ibid., p. 68.

23 Albach, Horst, Jin, Jim: Learning Effect and Market Concentration, mimeo, The Science Center Berlin, Berlin, March 1996.

greater the number of viable firms in the market. The smaller industry learning, the smaller the number of firms in the market. The more substitutable the products, i.e. the smaller the heterogeneity of the products, the smaller the number of viable firms. Finally, the more aggressive the pricing strategy is in the early periods after product launch, the smaller the number of firms in the market.

We conclude from these models, that the experience effects of a first mover strat­

egy lead to cost asymmetries which make the narrow oligopoly the most likely market structure. Since the individual learning effect is greatest when the firms rapidly increase output, the firms will aim at selling globally and enter the market with an aggressive pricing policy. The narrow oligopoly is, therefore, the result of very aggressive competition not only among the few that successfully enter the market, but among those also, that could potentially enter but do not see a chance to catch up with the competitive cost advantages of the early movers.

3. Global Competitive Advantage through Exclusive Rights

3.1 Intellectual Property and Antitrust

Let us now turn to the second group of global strategies which, according to Fellner, lead to competition among the few: Entry barriers erected by the exclu­

sive rights enjoyed by the firms.

In the context of Fellner’s analysis exclusive rights are patent rights and other intellectual property rights. Fellner also mentions the “exclusive possession of natural resources” and “short-run financial superiority” as factors which may lead to narrow oligopoly24. The most important “exclusive rights” enjoyed by firms that compete on global markets are, however, not so much exclusive possession of natural resources of financial superiority, but the patents and tacit know-how derived from research and development.

Anthony Clapes in an article “When Worlds Collide: Intellectual Property and Anti Trust”25 considers the view held by Fellner and a large number of econo­

mists that intellectual property rights confirm market power, a “myth”. However,

24 Fellner, William: loc. cit., p. 45.

25 Clapes, Anthony L.: When Worlds Collide: Intellectual Property and Antitrust: in Brown, Peter, and Clapes, Anthony L. (eds.): Intellectual Property Litigation, The Law Journal Seminars-Press, New York 1995, pp. 313-321.

he concedes that the US-Antitrust Guidelines for the licensing of intellectual property26 issued in 1995 “signal a distinctly more enlightened attitude toward intellectual property rights in an antitrust context27. Indeed, the guidelines clearly state that “the intellectual property laws and the antitrust laws share the common purpose of promoting innovation and enhancing consumer welfare. The intellectual property laws provide incentives for innovation ... Rapid imitation would reduce the commercial value of innovation and erode incentives to invest, ultimately to the detriment of consumers ... The agencies do not presume that intellectual property creates market power in the antitrust context”28. However, this view is not generally shared in economics and antitrust. As the Valium and Librium case shows, patens are considered to confer a monopoly position on the holder which can be abused by monopolistic pricing. In the recent Hilti case a patent and a copyright on the blue prints of a product have been held to confer a dominant position on the firm which can be abused by discriminative distribu­

tion.

3.2 Global Strategies for Scienceware Products

The problem at issue has great importance for global competition in our high- tech age. The R&D input in products sold on global markets has risen constantly to proportions that constitute a major part of total cost today. Therefore, I prefer to speak of scienceware products rather than of high-tech products. Two charac­

teristics of such scienceware products seem important in this context:

science content goodwill.

The science content of today’s global products is high. The expenses for R&D are at least several million DM and may well be in excess of 450 Mio. DM. The R&D write-off as a percentage of total costs is of the order of 15 to 25%29. 95% of the product’s life cycle cost is determined when production of the product begins, but only 10 % are actually incurred at this point in time30.

26 US Department o f Justice and the Federal Trade Commission: Antitrust Guidelines for the Licensing of Intellectual Property, Washington, D.C., April 6, 1995, in: Brown, Peter, and Clapes, Anthony L. (eds.): loc. cit. pp. 325-359.

27 Clapes, Anthony L.: loc. cit., p. 315.

28 Antitrust Guidelines, loc. cit., p. 330.

29 Honko, Jaakko: Case I, Vaisala, in: The Berlin Academy of Science and Technology (ed.):

Culture and Technical Innovation, Research Report No. 9, Berlin 1994, pp. 1068-1072, esp. p.

1069.

30 Albach, Horst: Culture and Technical Innovation, in: The Berlin Academy of Science (ed.):

Research Report No. 9, Berlin 1994, pp. 231 ff.

Scienceware products are difficult to understand. Their quality cannot easily be appreciated by the customer. He needs help in operating them. Most scienceware products have to be serviced by specialist service and maintenance personnel.

This requires trust on the side of the customer. The producer builds goodwill for himself and for his products. Goodwill becomes a substitute for knowledge.

Science today is a global enterprise. Scienceware products are, therefore, almost by definition global products, sold on global markets.

Competition for such products is a race to be the first on the market if there is a race at all. The race is only entered by firms that expect to make a profit. This requires imitation to be kept at a fairly safe distance. Therefore, coverage of scienceware products by intellectual property rights is of great importance. The race to be the first on the market may then become a patent race. However, on some markets the first mover strategy does not even leave time to prepare a patent application. Tacit know-how and reputation are occasionally sufficient to retain closeness to the customer and thus are equivalent to the exclusive rights that are responsible, in Fellner's view, for narrow oligopoly.

Jaakko Honko has analyzed a remarkable example of competition among the few where scienceware products and reputation are involved. In his paper entitled

"Global Competition in a Market Niche of Scienceware Products: Vaisala OY"

Honko shows that competition in this case is competition for the reputation for reliability of the products over a long period of time. But technological superiority has to be combined with high cost efficiency and productivity or else the reputa­

tion of being a market leader is lost. "Good long-term profitability makes it possible to reinforce the long-term relationships of the whole network in the global competition according to the company strategy....world-wide reputation is a necessary element in the global competitiveness of the company"31. Thus, expe­

rience effects and exclusive rights both have to be present in order to bring about a narrow oligopoly.

Reputation is, therefore, a vital part in the competitive strategies for scienceware products. In the banking industry, where product innovations cannot be patented but are nonetheless scienceware products, imitation is quick so that the innova­

tion itself is seldom profitable. But being the first with a financial innovation builds reputation for being a competent partner and strengthens the relationship

31 Honko, Jaakko: Global Competition in a Market Niche of Scienceware Products: Vaisala OY, in: ZfB 1996, no. 10.

with the customers32. A research based pharmaceutical company enjoys a price differential as compared with non research based rivals because customers clearly value the information on new product developments that they get from sales representatives of these companies as well worth the price difference on the products they buy in order to maintain these contacts.

Reputation thus softens price competition in the market. Customers will not easily switch to lower price offers because they do not want to thereby endanger the tacit knowledge and the trust embedded in a long-standing business relation­

ship. In such a relationship both partners enjoy significant learning effects. Each partner knows the products very well, knows the quality standards, the produc­

tion techniques of the partner. He may even have a permanent maintenance crew in the customer’s facility, and is familiar with the way of handling transactions.

Disputes are settled amicably. This is equivalent to saying that the partners enjoy significant scale and learning effects in marketing and purchasing.

In a long-term relationship, the quality of the product and, in particular, its safety have to be guaranteed by the supplier. The manufacturer, therefore, tries to minimize product risk. This implies a strategy of direct personal selling.

Wherever this is not possible or feasible, the manufacturer tries to control his distribution channel all the way to the final customer.

The exclusive rights that William Fellner analyzed as factors conducive to narrow oligopoly are, therefore, basically long term relationships between a supplier and his customers built on the economic advantage of low transaction costs due to economies of scope and economies of experience in marketing and purchasing. The stronger these relationships, the greater the reputation of a firm, the less important are in principle intellectual property rights for protecting these relationships unless the products are easily copied.

Reputation has to be maintained. It has to be constantly defended against the competitive moves of other firms that try to establish a better reputation by offer­

ing new and better products. With the high costs involved in building a global reputation for scienceware products, only a few firms will be able to take part in global innovation competition. These firms constitute a narrow oligopoly.

The overall conclusion to our first question is: narrow oligopoly is the dominant market structure on global markets particularly for high tech or scienceware

32 Steen, Gerrit: Der Innovationsprozeß bei Finanzdienstleistungen, MBA-thesis, Vallendar (WHU) 1994.

products. Narrow oligopoly is the result of competitive strategies that produce

“real production cost advantages” through economies of scale and economies of experience in production. Narrow oligopolies are also the result of competitive strategies to produce reputation and thereby real cost advantages through economies of learning and long term business relationships in marketing.

B. Information Sharing and Global Competition

As we have shown so far, narrow oligopoly is the pervasive structure of global markets. It is the search for competitive advantage of the global players that inevitably leads to competition among the few. We have also shown that in a narrow oligopoly there is a high probability that the few firms collude and thus reduce consumer welfare.

We now ask: How can this dilemma be solved? How can we theoretically and empirically decide whether behavior of firms observed in a narrow oligopoly is truly competitive or cooperative? From our previous argument it should be obvi­

ous that the indistinguishability theorem does not help. It does not make any difference for social welfare and for consumer surplus whether firms arrive at a collusive equilibrium through explicit agreement, tacit collusion or through inde­

pendent rational decision making. It is obviously very hard to detect implicit agreements of a few firms to restrain competition. This has always been a tough job not only for modern economics but also for medieval priests. As early as the sixteenth century Molina, after hearing many confessions by merchants in his confession chair in Sevilla, made an entry in his book of confessions saying: "It is easier to prove Trinity than it is to prove the tricks of the merchants!" But he did not show how to measure this concept empirically.

The test whether a market outcome is a cooperative one or a truly competitive one requires comparing the actual market outcome with an “ as-if-competitive”

outcome. The as-if-competitive outcome is, of course, hard to find out theoreti­

cally as well as empirically. Louis Phlips has suggested to use the non coopera­

tive Nash equilibrium as the as if competitive outcome. Recognizing that there might be a multiplicity of possible non-cooperative Nash equilibria, he suggested a particular Nash equilibrium: a perfect non cooperative and non collusive Nash

equilibrium (whether static or dynamic)33.

Whenever there is a period in the development of a particular market which was undoubtedly characterized by competition, it is possible to derive the “as-if- competitive solution econometrically for the period with alleged collusion”.

Several years ago we showed that despite alleged cartel agreements, the market outcome on the German polyamid market was a competitive one34. The test becomes more difficult if there is no such competitive reference period. This has been, e.g. the case on the European polypropylene market. But let us demon­

strate the problems that arise in such a situation using the European dye stuffs market as an example.

In the so-called Dye Stuffs-Decision35 the European Court decided that the public announcement of a price increase by one of the firms reduced the uncertainty of its future behavior in the market and that therefore the price increases of all the competitors that followed the announcement were a violation of Article 85 of the European Treaty which prohibits price cartels and mutually concerted actions on prices.

In a model with linear cost functions and nonlinear demand functions one can show36 that oligopolistic competition with secret price cuts leads to an equilib­

rium with price equaling marginal costs. This is a perfect non-cooperative and non-collusive Nash equilibrium in the Phlips sense. But this equilibrium cannot be sustained in a dynamic oligopoly because the firms do not cover fixed costs and would eventually go bankrupt. However, secret price increases are impos­

sible. The firms have to increase prices substantially in order to get out of the loss situation. This will, of course, meet with the opposition of the customers. The firms have to establish the conviction in the customers that they cannot avoid price increases of their suppliers. This is credible only if announced publicly.

“The general announcement of a price increase is, therefore, particularly condu­

cive to a continuation of the strategy of secret price cuts”37. The firm that makes the announcement knows, of course, that there are multiple equilibria in this

33 Phlips, Louis, The Economics of Imperfect Information, Cambridge et. al. 1988, p. 189.

34 Albach, Horst: Als-Ob-Konzept und zeitlicher Vergleichsmarkt, Tübingen 1976.

35 Urteil des Europäischen Gerichtshofs vom 14. Juli 1972, Rechtssache 51/69, Farbenfabriken Bayer AG gegen Kommission der EG, (IV/26.267 Farbstoffe).

36 Albach, Horst: Memorandum on Pricing Policy on the European Dye Stuffs Market, submitted to the European Court of Justice at the oral hearing in Luxemburg, Luxemburg 1971; cf. also Albach, Horst: Das Gutenberg-Oligopol, in: Koch, Helmut (ed.): Zur Theorie des Absatzes, Wiesbaden 1973, pp. 9-33.

37 Albach, Horst and Kloten, Norbert: Preispolitik auf dem Farbstoffmarkt in der EWG, Gutachtliche Stellungnahme, Tübingen 1973, p. 35.

game. It can announce a 15% price increase or a 12 % price increase or anything in between. The probability of the rivals following suit might be greater with a 12% increase than with a 15% increase because of rising customer opposition. On the other hand, a 15% increase helps better to recoup losses suffered presently and provides a better basis for future secret price cuts. Whatever percentage price increase the first mover announces, the rivals will focus on this price increase to establish a new equilibrium. This has been called the “focal princi­

ple”38. The focal principle states that among the many solutions of a game one solution may be self-evident. It seems self-evident for the competitors in a narrow oligopoly to follow the announcement of the first mover in order to get out of a loss situation. This parallel behavior follows quite independently and does not require any “plus factor” like “direct communication, anti-competitive intent or behavior inconsistent with independent behavior”39. It does not require “cheap talk” as actually happened in the dye stuffs case40. Since in the chemical industry cross deliveries and joint sales organizations are not uncommon, a letter by one firm announcing a 14 % price increase to all customers would have become known to all competitors immediately and would have been followed immediately by all rivals assuming rational behavior41.

The European Court insists on secret price cutting as an indicator of workable competition on a narrow oligopoly. The announcement from time to time of a significant percentage price increase across the board of the products is an integral part of this form of price competition. It cannot, therefore, be treated as a case of collusion. At the same time on such a market there is obviously not one single perfect non-cooperative and non-collusive Nash equilibrium. Therefore the Phlips criterion for distinguishing a collusive equilibrium from a non-collusive does not hold.

However, the European Court in the dye stuffs decision established an interest­

ing rule: reduction of the uncertainty about a rival’s action is per se a restraint of competition and therefore deemed illegal. The decision focused attention on information as a strategic variable in competition.

38 Kreps, David M.: A Course in Microeconomic Theory, Princeton, New Jersey 1990, p. 415.

39 Baker, Jonathan: Two Sherman Act Section I Dilemmas: Parallel Pricing, the Oligopoly Problem and Contemporary Economic Theory: The Antitrust Bulletin, Spring 1993, pp. 143-219.

40 Farrell, J.: Cheap Talk, Coordination and Entry, in: The Rand Journal of Economics, Volume 34 (1987), p. 18.

41 In the Italian dye stuffs market the Italian producer ACNA did not follow. The competitors had to take back their announcements of a price increase as a consequence. The loss situation continued on the Italian market and eventually led to the bankruptcy of ACNA.

In classical economics, perfect information was considered a necessary element of perfect competition. It was recognized, of course, that full information of all the rivals combined with infinitely small reaction times ruled out any deviation from the existing equilibrium except for external shocks. In particular, innovation does not occur because the advantages of innovation cannot be appropriated by the innovator. The innovator would immediately go bankrupt because he cannot cover the cost of innovation.

On imperfect markets, the situation is obviously different. There are many heterogeneous products on the market, and customers may refrain from search­

ing the market thoroughly for the lowest price product due to high search costs.

Therefore, the price level is on average higher than on a perfect market. Some customers may shy away from' purchasing a new product dues to asymmetric information on the quality of the product. Others, the early adopters, are less risk averse and buy the new product. They then signal to the late followers that the new product is of good quality. Therefore, a better product does not immedi­

ately cannibalize the older, well-known products. Advertising tends to increase customer preference for a product thus making it more costly and less attractive for a competitor to fight for that customer. Brand loyalty thus softens price competition.

The courts have drawn their own conclusions from the theory of imperfect competition. Louis Phlips summarized the attitude of the European Court as expressed in the wood pulp42 decision of 1984: “Perfect information among competitors is not only a necessary condition for collusion, but also a sufficient condition, because oligopolists want to collude... Multilateral information trans­

mission is, therefore, p e r se evidence of collusion”43. The court had argued:

“Individualized data exchanges are significant from the point of view of competi­

tion, as such exchange provides in itself sufficient insight into the conduct of the firms concerned in the Common Market. It does create a system of mutual solidarity and influence and thereby tends to substitute for the risks inherent in competition”. This approach to the narrow oligopoly dilemma has raised serious difficulties for the firms competing on global markets. Is any strategic use of information a per se violation of antitrust laws? What does such an attitude mean for global competition, if, say, Japanese antitrust law does not apply or enforce such a doctrine and rather follows its tradition of information sharing and information dissemination of all firms?

42 Commission Decision December 19, 1984 (Wood Pulp) official Journal No. L 85/1.

In what follows, I will first try to show the historical origin of the doctrine devel­

oped by the European Court, with particular emphasis on competition in a narrow oligopoly market. Then I will discuss recent advances in economic theory of information sharing and finally apply our own research results in this field to a practical problem.

II. Information Sharing and Antitrust

1. The American Column-Lumber Co.-Case

In 1921 the US-Supreme Court passed a decision against the American Hard­

wood Manufacturers Association. The association collected and disseminated price and production information. 465 of the 9.000 paper mills in the United States participated in the information exchange system. They accounted for 30%

of total output. The Court came to the conclusion that the information exchange system was an attempt to increase price and was therefore to be considered a violation of section I of the Sherman Act. This case is certainly a case of a wide oligopoly. The Court acknowledged that collusion would be difficult on such a market. Nevertheless the Court stated: “Genuine competitors do not make daily, weekly, and monthly reports of the minutes details to their rivals ... This is not the conduct of competitors but so clearly that of men united in an agreement, express or implied, to act together and pursue a common purpose under a common guide”. In dissenting, Judge Holmes stated: “I should have thought that the ideal of commerce was an intelligent exchange made with full knowledge of the facts”. Judge Brandeis said in his dissenting opinion: “The information exchange tends to promote all in competition which is desirable: by substituting knowledge for ignorance, rumor, guess, and suspicion, research and reasoning for gambling and piracy, without closing the door to adventure or lessening the value of prophetic wisdom. Banning the information exchange may result in sup­

pressing competition in the hardwood industry”43 44.

This case clearly shows the application of the per se-rule on the one hand and of the view that an information exchange system may have pro-competitive effects on the other45.

43 Phlips, Louis: The Economics of Imperfect Information, Cambridge et al. 1988, p. 185.

44 cf. Jin, Jim: Court Decisions on Information Exchange, Evolution of per se Rule and Rule of Reason, The Science Center Berlin, Berlin May 1995, p. 9 f. (mimeo).

45 cf. Jin, Jim: Court Decisions on Information Exchange, Evolution of per se Rule and Rule of Reason, The Science Center Berlin, Berlin May 1995, p. 9 f. (mimeo).

2. The Maple Flooring Case

In its 1925 decision in favor of the Maple Flooring Association, the US Supreme Court upheld the association’s information system as in compliance with section I of the Sherman Act. The association had only 22 members, but made its detailed statistics on past prices and production and other pertinent variables widely public. Individual competitors could not be identified. The court stated:

“Competition does not become less free merely because the conduct of commercial operations becomes more intelligent through the free distribution of knowledge of all essential factors entering into the commercial transaction”.

This information sharing system was obviously considered legal because the information was widely disseminated and did not contain information that helped to identify rivals’ actions.

3. The Fatty Acids-Case

In 1986, the European Commission passed two decisions on information sharing systems. The first one involved an information exchange system in the olio chemical industry operated within the Association des Producteurs d’Acides Gras, the Association of Producers of Fatty Acids (oleine and stearine) which are used for making soap, detergents, paints, resins, industrial lubricants, cosmetics, and other products. Three members of the association accounted for 60 % of the market. The information exchange which was operated by the Swiss fiduciary company FIDES did not release data with rival identification. However, the three major firms in the market agreed in 1979 to exchange information of their sales to third parties on a quarterly basis. They agreed also to keep this information from their respective sales organizations. The information exchange was on past sales in Europe without further regional breakdown.

The Commission was of the opinion that the agreement “enabled each of the parties to identify more precisely the competitive behavior of the others more quickly and easily than would have been possible, if at all, in the absence of the agreement”46.

The following elements of the information exchange were considered per se violations of article 85:

46 European Commission, Decision of September 2, 1986, IV/31.128 - Fatty Acids, in: Official Journal of the European Communities, No. L 3 of January 6, 1987. pp. 17-26, esp. p 22.

1. The agreement strengthened the connection between the three competi­

tors.

2. The agreement provided a forum for raising criticism about aggressive competitive behavior of rivals.

3. The agreement provided a means of monitoring future performance of the competitors.

4. The agreement created a climate or conditions in which additional restric­

tive arrangements such as fixed national quotas or prices could become possible.

The Commission argues that

1. the agreement removed an important element of uncertainty to the part of each of the three firms as to the activities of the others, an argument well known from the dyestuffs case,

2. the agreement had the intent to stabilize the market,

3. under the agreement business secrets were exchanged which is not consis­

tent with independent behavior,

4. the agreement was concluded in a recession. In such a period it can rationally be expected that the intensity of competition increases. The agreement in the words of the commission “inevitably led them to temper their competitive behavior towards each other”.

The Commission acknowledged that the restrictive effects of the agreement “may not be measurable or even apparent to an observer of the market unaware of the existence of such an agreement”. This is a good formulation of the

“indistinguishability theorem”. In such a situation it seems sufficient for the Commission to show that the probability of potential collusion is enhanced by the information exchange agreement in order to consider the agreement a violation of Article 85. Information on past sales with rival identification seems to be consid­

ered a per se restraint of competition even if the information is exchanged on a quarterly basis only and without any regional break-down.

4. The X/Open Group Case

The final case to be reviewed here is the X/Open Group decision by the European Commission47. This decision involved two information exchange systems, the

“group agreement” and the agreement of the group with AT&T. The members of the group agreement were major manufacturers in the European information technology industry with established expertise in UNIX. They agreed to

47 European Commission, Decision IV/31. 458-X/Open Group of December 15, 1986, in: Official Journal o f the European Communities No. L 35 of February 6, 1987, pp. 36-43.

exchange technical and market information. The market information includes analyses of the relevant market for UNIX operating systems. The information exchange system between the group and AT&T provided information on AT&T’s UNIX SYSTEM V operating system and related software and other unpublished material of the same sort.

The Commission regarded the lead time advantage that the members of the group enjoyed an “appreciable competitive advantage” over their non-member hardware and software competitors. The terms of membership of the group did not in the opinion of the Commission rule out discriminatory treatment of appli­

cations. But the Commission also found pro-competitive aspects in the informa­

tion exchange system. The open industry standard developed by the group releases users from their dependence on a single supplier and thereby helps increase competition between the members and between the members and AT&T. The Commission concluded that “the advantages involved in the creation of an open industry standard easily outweigh the distortions of competition entailed in their rules of governing membership”. The “willingness of the group to make available the results as quickly as possible” was another argument for the Commission to regard the information exchange as compatible with Article 85.

5. The European Commission's Notice on Information Sharing Systems

The European Commission has on several occasions stated its principles for decisions on information sharing systems. As early as 1968 the Commission passed a “notice concerning agreements, decisions and concerted practices in the field of cooperation between enterprises”48. According to this notice the joint preparation of statistics and calculation models does not restrict competition.

However, the Commission warns: “A restraint of competition may occur in particular on an oligopolistic market for homogeneous products.”

In particular, the Commission regards as a means to restrict or distort competi­

tion information agreements on

1. individual data from individual firms, generally viewed as trade secrets 2. information exchange systems on oligopolistic markets

3. information exchange systems which do not involve buyers

4. information exchange systems that provide or facilitate any direct or

48 0 . J., 75 of July 29, 1968, p. 3; see also O. J. 84 of August 28, 1968, p. 14.

indirect contact between firms in order to influence the behavior of a competitor or that discloses to him the future behavior of the firm.

The Commission specified its rules with regard to information sharing systems in its 7th Report on Competition Policy in 1977 as follows49:

1. information exchange systems are not per se prohibited

2. information exchange systems are prohibited if anti-competitive use of the information- provided is actually made

3. non-identifying information systems are permitted

4. stricter rules are applied in oligopolies than in polypolistic markets.

In a paper to the Round Table on Information Sharing and Antitrust Policy at the Berlin Science Center Caballero Sanz gave a personal but authoritative interpretation of the EC antitrust enforcement in the field of information exchange systems50. An information exchange system is prohibited, if

1. it is another instrument in the mechanisms of collusive agreements 2. it is the only possible way to achieve market coordination in a wide

oligopoly

3. the market is homogeneous

4. the data exchanged are individualized

5. the data exchanged are more recent than one year 6. the data can be considered trade secrets or confidential

7. the market is a wide oligopoly and the goods are not perfect substi­

tutes.

III. The Economic Theory of Information Exchange

1. Inform ation sharing in a wide oligopoly

The review of the jurisdiction on information exchange systems shows a tendency towards a per se prohibition of information systems with rival identification in an oligopoly even if the information exchanged is historical data51. This may be the consequence drawn by lawyers from a situation which in the view of the

49 See Niemeyer, Hans-Jörg: Market Information Systems, in: ECLR Vol. 4 (1993), pp. 151-156.

50 Caballero Sanz, J.: Round Table on Information Sharing and Antitrust Policy at the WZB, August 2, 1993 (mimeo), cf.: Caballero Sanz, J.: Information Exchange Mechanisms and EC Antitrust Policy, in: Albach, Horst, Jin, Jim Y., Schenk, Christoph (eds): Collusion Through Information Sharing? New Trends in Competition Policy, Berlin 1996, pp. 27-36.

51 For a review of the historical developments of the per se rule and the rule of reason see: Carter, John R.: From Peckham to White: economic welfare and the rule of reason, in: The Antitrust Bulletin 1980 (Summer), pp. 275-295; de Frenes, Michael C.: Das US-amerikanische Kartellstrafrecht, (Schriften zum gesamten Wirtschaftsstrafrecht), Band 4, Köln 1984, pp. 33-36.

German Supreme Court was defined as follows: “There are no safe and empiri­

cally founded rules about the effects of market information systems on competi­

tion that can bind the lawyer”52, i.e. that could limit his discretionary power.

In the following section I will review the advances in the economic theory of information exchange systems that will, I hope, eventually lead the courts to accept limits on their legal discretion in treating information exchange systems.

Since our emphasis is on information systems in a narrow oligopoly it may suffice to cite only a few research results for the wide oligopoly.

Zhang and Zhang provide a proof for the following theorem: With incomplete information about market demand, if firms pool their private information, then the market under Cournot or Stackelberg competition approaches the competi­

tive equilibrium output53. This result means that in a wide oligopoly an informa­

tion sharing system results in a competitive equilibrium and is, therefore, pro- competitive. However, this result is not derived for the repeated game but only for a static n-firm oligopoly with information cascades where each firm through its production decision fully reveals its private information and where the firms make sequential production decisions.

Alexis Jaquemin in his careful analysis of the European Commission's decision in the wood pulp case cited above concludes that “the Commission by pushing too far its own arguments runs the risk of ‘throwing away the baby with the bath­

water'”. He points out: “It is clear that there are no general arguments against information exchanges, direct or indirect, if these exchanges are not combined with collusive or cartel agreements”54.

The distinction between Cournot competition and Bertrand competition is crucial for an assessment of the welfare effects of information sharing systems55.

Zohlnhöfer has analyzed the impact of market information sharing systems on

52 Federal Court of Justice BGH - Decision of January 29, 1975 - KRB 4/74 - Aluminiumhalbzeug, in: Wirtschaft und Wettbewerb 1975, EBGH 1337; cf.: Forschungsinstitut für Wirtschaftsverfassung und Wettbewerb e. V. (FIW) Köln (ed.): Grundfragen des Kartellverbots, Skript No. 9, May 27, 1988.

53 Zhang Jianbo, and Zhang Zhentang, Asymptotic Efficiency in an Oligopolistic Market, Discussion Paper FS IV, 95-28, The Science Center Berlin, November 1995, p. 4.

54 Jacquemin, Alexis: Comments on the EEC Commission's Decision in the wood pulp case as it relates to certain British-Columbian Producers, mimeo, April 22, 1985.

55 Jacquemin, Alexis: Collusive Behavior, R&D, and European Competition Policy, paper delivered to the 4th Conference on Industrial Economics in the Berlin Science Center, March 16- 20, 1987, Berlin 1987, mimeo.

competition assuming a declining market with long-run overcapacity56. He argues that it is highly probable on a shrinking market that strategies of coop­

eration (like a market information sharing system) reduce the intensity of competition from an overoptimal level to an optimal one (in the sense of workable competition). These strategies are in his opinion not illegal unless other anti­

competitive practices are employed by the firms at the same time. In Zohlnhöfers’

view, a market information system is not only a legitimate and appropriate, but also an indispensable instrument to guide the competitors on an orderly retreat to positions that can be sustained in the long run.

Michael Riordan has solved a two period symmetric quantity game with stochas­

tic demand, exogenous capacity and homogeneous products. There a n firms on the market57. For the price game, however, he reasons that if a firm raises its price independently, the rival firms will “experience a surge in demand” which prompts them to increase their own prices. Prices would thus increase above the prices that would prevail in the market if the firms would share information on past prices. Therefore, the information exchange with rival identification increases consumer surplus and welfare.

2. Inform ation Sharing in Narrow Oligopoly

In the first paper on information sharing in the framework of the new industrial economics Novshek and Sonnenschein showed that the firms are indifferent to complete information sharing if the firms are approximately certain of their envi­

ronment58. They proved that under these circumstances there is in general no incentive for any of the firms to share information.

In a very influential paper Richard Clarke has pointed to a dilemma:

“Information pooling is good if firms behave competitively, but shared informa­

tion makes anti-competitive agreements easier to construct”59. In his analysis, it

56 Zohlnhöfer, Werner: Marktinformationsverfahren und ihre Beurteilung nach Art. 85 EWGV aus wettbewerbspolitischer Sicht, Memorandum for the Landmaschinen- und Ackerschlepper Vereinigung Frankfurt-Niederrath, Mainz, November 1989 (mimeo).

57 Riordan, Michael H.: Imperfect information and dynamic conjectural variations, in: Rand Journal o f Economics Vol. 16 (1985), No. 1, pp. 41-50.

58 Novshek, William, Sonnenschein, H., Fulfilled Expectations Cournot Oligopoly with Information Acquisition and Release, in: Bell Journal o f Economics, Vol. 13 (1982), pp. 214-218. A nice survey o f the existing literature on information sharing was presented by Novshek at a workshop on information sharing and competition in Berlin in 1993. See Novshek, William:

Directions for Research in Information Sharing in: Albach, Horst, Jin, Jim Y., Schenk, Christoph (eds.): Collusion Through Information Sharing? New Trends in Competition Policy, Berlin 1996, pp. 13-27.

59 Clarke, Richard N.: Collusion and the Incentives for Information Sharing, in: Bell Journal of