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On the tacit collusion equilibria of a dynamic duopoly investment game

Author

Listed:
  • Richard Ruble

    (EM LYON Business School & GATE (UMR 5824 CNRS))

  • Bruno Versaevel

    (EM LYON Business School & GATE (UMR 5824 CNRS))

Abstract

This note extends the characterization of simultaneous investment (tacit collusion) equilibria in Boyer, Lasserre and Moreaux (2012). Tacit collusion equilibria may or may not exist, and when they do may involve either finite time investments (type 1) or infinite delay (type 2). The relationship between equilibria and common demand forms is not immediately apparent. We provide the full necessary and sufficient conditions for existence. A simple condition on demand primitives is derived that determines the type of equilibria. Common demand forms are then shown to illustrate both finite-time and infinite-delay tacit collusion.

Suggested Citation

  • Richard Ruble & Bruno Versaevel, 2012. "On the tacit collusion equilibria of a dynamic duopoly investment game," Economics Bulletin, AccessEcon, vol. 32(4), pages 2817-2827.
    • Handle: RePEc:ebl:ecbull:eb-12-00608
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    References listed on IDEAS

    as
    1. Boyer, Marcel & Lasserre, Pierre & Moreaux, Michel, 2012. "A dynamic duopoly investment game without commitment under uncertain market expansion," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 663-681.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
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    More about this item

    Keywords

    Real options; Duopoly; Collusion; Investment;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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