European Journal of Law and Economics

, Volume 45, Issue 3, pp 439–468 | Cite as

Information exchange through non-binding advance price announcements: an antitrust analysis

  • Willem Boshoff
  • Stefan Frübing
  • Kai Hüschelrath


We study the welfare effects of non-binding advance price announcements. Applying a simulation-based approach in a differentiated Bertrand model with horizontal products and asymmetric information, we find that such announcements can help firms to gain information on each other thereby allowing them to achieve higher profits. However, our results also show that the overall welfare effects of such announcements in a context of heterogeneous products are not as clear-cut as previous research in a homogeneous products framework has suggested. We conclude that—although non-binding advance price announcements may raise competition concerns—in many settings, their positive effects are likely to outweigh the potential detrimental effects on welfare.


Antitrust policy Collusion Information exchange Price announcements 

JEL Classification

L41 K21 



We are grateful to four anonymous reviewers and Cedric Argenton, Eckart Bueren, Jens-Uwe Franck, Georg Götz, Joe Harrington, Yusuke Ikuta, Catarina Marvao, Matthew Olczak and Konrad Stahl as well the audiences at the 2015 International Industrial Organization Conference in Boston, the 2015 BECCLE Competition Conference in Bergen, the 2015 CLEEN Workshop in Tilburg, the 2015 EALE Conference in Vienna, the 4th International Workshop on the Economics of Competition and Industrial Organization in Cape Town and the 2014 MPI-ZEW Private Law and Economics Workshop in Mannheim for valuable comments and suggestions.


  1. Athey, S., & Bagwell, K. (2001). Optimal collusion with private information. RAND Journal of Economics, 32, 428–465.CrossRefGoogle Scholar
  2. Athey, S., & Bagwell, K. (2008). Collusion with persistent cost shocks. Econometrica, 76, 493–540.CrossRefGoogle Scholar
  3. Bennett, M., & Collins, P. (2010). The law and economics of information sharing: The good, the bad and the ugly. European Competition Journal, 6, 311–337.CrossRefGoogle Scholar
  4. Blair, R., & Romano, R. (2002). Advance price announcements and antitrust policy. International Review of Law and Economics, 21, 435–452.CrossRefGoogle Scholar
  5. Borenstein, S. (1999). Rapid price communication and coordination: The Airline Tariff Publishing Case (1994). In J. E. Kwoka & L. J. White (Eds.), The antitrust revolution (3rd ed.). Oxford: Oxford University Press.Google Scholar
  6. Capobianco, A. (2004). Information exchange under EC competition law. Common Market Law Review, 41, 1247–1276.Google Scholar
  7. Compte, O. (1998). Communication in repeated games with private monitoring. Econometrica, 66, 597–626.CrossRefGoogle Scholar
  8. Cooper, D., & Kühn, K.-U. (2014). Communication, renegotiation, and the scope of collusion. American Economic Journal: Microeconomics, 6, 247–278.Google Scholar
  9. Deneckere, R., & Kovenock, D. (1992). Price leadership. Review of Economic Studies, 59, 143–162.CrossRefGoogle Scholar
  10. European Commission. (2011). Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to Horizontal Co-operation Agreements, Brussels.Google Scholar
  11. Farrell, J. (1987). Cheap talk, coordination and entry. RAND Journal of Economics, 18, 34–39.CrossRefGoogle Scholar
  12. Farrell, J., & Rabin, M. (1996). Cheap talk. Journal of Economic Perspectives, 10, 103–118.CrossRefGoogle Scholar
  13. Friedman, J. (1967). An experimental study of cooperative duopoly. Econometrica, 35, 379–397.CrossRefGoogle Scholar
  14. Garcia Diaz, A., Hernan Gonzalez, R., & Kujal, P. (2009). List pricing and discounting in a Bertrand–Edgeworth duopoly. International Journal of Industrial Organization, 27, 719–727.CrossRefGoogle Scholar
  15. Harrington J., Gonzalez, R. H., & Kujal, P. (2014). The relative efficacy of price announcements and express communication for collusion: Experimental findings. Working Paper, University of Pennsylvania, Philadelphia.Google Scholar
  16. Hall, M. (2014). To whom are you announcing? EU authorities focus on price signaling, “Hot Topics” in International Antitrust Law, American Bar Association, Section of International Law, International Antitrust Law Committee.Google Scholar
  17. Harrington, J. (2012). A theory of tacit collusion. Working Paper, Johns Hopkins University, Baltimore.Google Scholar
  18. Holt, C., & Davis, D. (1990). The effects of non-binding price announcements on posted-offer markets. Economics Letters, 34, 307–310.CrossRefGoogle Scholar
  19. Holt, C., & Scheffman, D. (1987). Facilitating practices: The effects of advance notice and best-price policies. RAND Journal of Economics, 18, 187–197.CrossRefGoogle Scholar
  20. Kandori, M., & Matsushima, H. (1998). Private observation, communication and collusion. Econometrica, 66, 627–652.CrossRefGoogle Scholar
  21. Kaplow, L., & Shapiro, C. (2007). Antitrust. In M. Polinsky & S. Shavell (Eds.), Handbook of law and economics (Vol. 2, pp. 1073–1225). Amsterdam: Elsevier.Google Scholar
  22. Kühn, K.-U. (2001). Fighting collusion—Regulation of communication between firms. Economic Policy, 16, 167–204.CrossRefGoogle Scholar
  23. MacLeod, W. (1985). A theory of conscious parallelism. European Economic Review, 27, 25–44.CrossRefGoogle Scholar
  24. Marshall, R., Marx, L., & Raiff, M. (2008). Cartel price announcements: The vitamins industry. International Journal of Industrial Organization, 26, 762–802.CrossRefGoogle Scholar
  25. Miller, A. (2010). Did the airline tariff publishing case reduce collusion? Journal of Law and Economics, 53, 569–586.CrossRefGoogle Scholar
  26. Motta, M. (2004). Competition policy—Theory and practice. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  27. Mouraviev, I., & Rey, P. (2011). Collusion and leadership. International Journal of Industrial Organization, 29, 705–717.CrossRefGoogle Scholar
  28. Nocke, V., & White, L. (2007). Do vertical mergers facilitate upstream collusion? American Economic Review, 97, 1321–1339.CrossRefGoogle Scholar
  29. OECD. (2010). Roundtable on information exchanges between competitors under competition law—Note by the Delegation of the United States, DAF/COMP/WD(2010)117.Google Scholar
  30. OECD. (2012). Unilateral disclosure of information with anticompetitive effects—United States. DAF/COMP/WP3/WD(2012)14, Paris.Google Scholar
  31. Rotemberg, J., & Saloner, G. (1990). Collusive price leadership. Journal of Industrial Economics, 39, 93–110.CrossRefGoogle Scholar
  32. Schelling, T. (1960). The strategy of conflict. Cambridge: Harvard University Press.Google Scholar
  33. Scherer, F. (1967). Focal point pricing and conscious parallelism. Antitrust Bulletin, 12, 495–503.Google Scholar
  34. Shearman & Sterling. (2014). Beware of Public Announcements! Recent European Competition Developments on Price Signalling, Client Publication, 24 March 2014, Brussels.Google Scholar
  35. Siciliani, P. (2014). Should we act ex post against tacit collusion—And how? Journal of European Competition Law and Practice, 5, 294–303.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Willem Boshoff
    • 1
  • Stefan Frübing
    • 2
  • Kai Hüschelrath
    • 2
    • 3
  1. 1.Department of EconomicsStellenbosch UniversityMatielandSouth Africa
  2. 2.Competition and Regulation Research GroupZEW Centre for European Economic Research and MaCCI Mannheim Centre for Competition and InnovationMannheimGermany
  3. 3.University of Mannheim, L7, 3-5MannheimGermany

Personalised recommendations