How can information sharing facilitate collusion?

One of the main factors that facilitate collusion is information exchange between the various firms in collusive agreement. Oligopolies employ various cooperative strategies one of which is information exchange to create and maintain cartels. Providing sufficient information to other partners in the collusive arrangement that compliance is easily ascertained.

Information exchange can facilitate cartels or promote efficiency. One affirm can convince rivals that its not trying to steal customers through a price discount is to announce its identity of its new customers and the price and quantity terms offered. The firm makes this announcement so that when a customer shifts supplier, a price war is not triggered by riv...