Centralization of pricing decisions and collusion

This paper compares the feasibility of tacit collusion when pricing decisions are either centralized or decentralized. The intuition is that the number of pricing decision makers on a market is likely to have more impact on the price competition than the number of firms. When the firms face a random demand and have multimarket contacts, we prove that centralization is more collusive than decentralization because it reduces the cost of price-cutting dissuasion. This result is reinforced if centralization decreases the frequency of price revision. Finally, this study emphasizes some practices that can facilitate collusion with imperfect monitoring. Classification JEL : L13, L22, L41.