Hidden Prices

Tobias Wenzel (University of Bath)


We explore the incentives of firms to shroud prices in a model where consumers can be fooled by firms partitioning prices into an observable and a potentially unobservable price component. In the static game hidden prices can only arise under restrictive conditions if the market is sufficiently concentrated and the shrouded price component is sufficiently high. In the dynamic game we find strong pro-collusive effects of hidden prices in that firms can more easily collude on hidden prices than in the static game and collusion is also facilitated compared to standard Bertrand markets. Such collusive strategies are moderated if consumer learning is important.