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Collusive Market Sharing with Spatial Competition

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  • Kai Andree

    ()
    (University of Potsdam)

  • Mike Schwan

    ()
    (University of Potsdam)

Abstract

This paper develops a spatial model to analyze the stability of a market sharing agreement between two firms. We find that the stability of the cartel depends on the relative market size of each firm. Collusion is not attractive for firms with a small home market, but the incentive for collusion increases when the firm's home market is getting larger relative to the home market of the competitor. The highest stability of a cartel and additionally the highest social welfare is found when regions are symmetric.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P323.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 4 ()
Pages: 3357-3364

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Handle: RePEc:ebl:ecbull:eb-12-00782

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Keywords: Spatial Competition; Market Sharing; Collusion;

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  1. BELLEFLAMME, Paul & BLOCH, Francis, . "Sustainable collusion on separate markets," CORE Discussion Papers RP -2070, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Thisse, J.-F. & Vives, X., 1987. "On the strategic choice of spatial price policy," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Tharakan, Joe & Thisse, Jacques-Francois, 2002. "The importance of being small. Or when countries are areas and not points," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 381-408, May.
  4. Kai Andree, 2013. "Collusion in Spatially Separated Markets with Quantity Competition," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 309-318, September.
  5. John Gross & William L. Holahan, 2003. "Credible Collusion in Spatially Separated Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 299-312, February.
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