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BloodyShrimp comments on Three Parables of Microeconomics - Less Wrong
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Comments (38)
How long are years on Townton's planet? Or is the Schelling price increase path nonlinear?
Three months into the process, the economist came back, and sold them both digital signs that update every hour.
Isn't the moral of the story that the gas station owners colluded to form an illegal cartel to raise gasoline prices?
The moral, as I understood it, is that you don't need illegal collusion to gain the effects of a cartel as long as you can use your pricing to play a reasonably pure iterated prisoner's dilemma with the other members of your oligopoly.
Without communication it's iterated prisoner's dilemma (co-operate=raise prices, defect=lower prices), and so long as they're not communicating there's no actual cartel.
Are they really not communicating, though? They seem to be signalling to each other their willingness to cooperate in the prisoner's dilemma.
I'd be very surprised if judges and regulators failed to classify this as a cartel.
They're communicating in an information-theoretic sense, but probably not in a legal sense.
If something as simple as this can be considered a cartel, then the entire free market system is a cartel.
The whole point is that companies can only communicate with each other in this manner, and not directly, because that would be collusion.
When I have time, I'll look up the specific legislation, though i suspect it varies by area.