This paper analyzes coordination in tacit collusion when firms' discount factor is private information. We consider an infinitely repeated duopoly where two states of the world randomly occur, with different incentives for collusion. Depending on its own discount factor, a firm chooses cooperative behavior in both states (patient), in none of the states (impatient) or in one state (mildly patient). The presence of different states affects the strategic role of beliefs. A mildly patient firm has an incentive in "faking patience"to get the deviation profit. Interestingly, this effect prevents or delays collusion when the belief in patience is strong.

Original languageEnglish
Article number2350003
Number of pages34
JournalInternational Game Theory Review
Volume25
Issue number2
Early online date15 Nov 2022
DOIs
StatePublished - 1 Jun 2023

    Research areas

  • duopoly games, Tacit collusion, unknown discount factor

    Scopus subject areas

  • Computer Science(all)
  • Business and International Management
  • Statistics, Probability and Uncertainty

ID: 101126253