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Cost structures, technology levels and collusion

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  • Suryaprakash MISHRA

    (National Law University, Delhi, India)

Abstract

We analyze the role of technology levels in collusion and welfare in Cournot duopoly set up with a linear demand and quadratic costs. We show that for relatively inefficient technologies, the collusive profit is dominated by the Cournot-Nash profit; thus, the firms with not-so good technologies would not collude. We also show that as technology improves, the collusive profit dominates the Cournot-Nash profit, which creates an incentive for collusion, i.e., innovation would lead to collusion. We also show that, for very good/bad technology, innovation would not be anticonsumers’ welfare, whereas for the intermediate one, it may be.

Suggested Citation

  • Suryaprakash MISHRA, 2022. "Cost structures, technology levels and collusion," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(633), W), pages 231-238, Winter.
    • Handle: RePEc:agr:journl:v:4(633):y:2022:i:4(633):p:231-238
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