Cartelization under present bias and imperfect public signals

Long Cheng, Stuart McDonald, Guangliang Ye

Research output: Journal PublicationArticlepeer-review


This paper explores the impact of present bias on trigger pricing strategies that are used to support a cartel in a market where firms can only observe a noisy price signal. The present bias of firm management is modelled by using quasi-hyperbolic discounting that the discount factor between the present and next period is βδ, and between any two adjacent periods later it is δ. We demonstrate that there is a threshold value β̲(δ), which is decreasing in δ. For β≥β̲(δ), we show that there exists a Nash reversion trigger strategy for the cartel, featuring lower prices, higher outputs and longer periodic price wars. As a consequence, the trigger price, which is shown to be proportional to the cartel price, is always lower than that in the Green-Porter model.

Original languageEnglish
Pages (from-to)77-86
Number of pages10
JournalMathematical Social Sciences
Publication statusPublished - May 2023


  • Collusion
  • Quasi-hyperbolic discounting
  • Repeated oligopoly
  • Time inconsistency
  • Trigger pricing

ASJC Scopus subject areas

  • Sociology and Political Science
  • General Social Sciences
  • General Psychology
  • Statistics, Probability and Uncertainty


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