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5 - Transparency about past, present and future conduct: experimental evidence on the impact of competitiveness

Published online by Cambridge University Press:  04 December 2009

Jeroen Hinloopen
Affiliation:
Universiteit van Amsterdam
Hans-Theo Normann
Affiliation:
Royal Holloway, University of London
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Summary

Transparency relates to communication and information about the conduct of firms. Transparency can relate to the past, the present and the future and it can vary in format, content and reliability. In this chapter I review experimental evidence which relates to the impact of transparency on the competitiveness of markets.

Introduction

Competition, free and unfettered, is absolutely destructive to all stability of prices … Knowledge regarding bids and prices actually made is all that is necessary to keep prices at reasonably stable and normal levels.

(Arthur J. Eddy, as quoted in Scherer and Ross, 1990: 348)

In his book The New Competition Eddy suggested a policy of “open prices” in which competitors be actively stimulated to communicate and exchange price information or that industries set up trade associations to provide the service for them. Eddy's proposal fell on fertile ground. In the decades following his recommendation, open price associations formed in several industries. In the 1930s some 400 associations were approved by the National Recovery Administration in the United States. The practice of information exchange between competitors is still very much alive today. A significant recent example is the Airline Tariff Publishing Company set up by the major US airlines to exchange detailed information about fares, proposed fare changes, fare restrictions and other marketing data.

Ever since its initiation the open price policy has been under scrutiny of the antitrust authorities. Dissemination of information has met with varying degrees of hostility by the courts, in both the US and Europe.

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Publisher: Cambridge University Press
Print publication year: 2009

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