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Tacit collusion and its welfare effect in a network product market

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  • Tsuyoshi Toshimitsu

    (Kwansei Gakuin University)

Abstract

Based on a horizontally differentiated duopoly model with network externalities, and focusing on the role of compatibility between products, we demonstrate the conditions under which collusive behavior improves social welfare. In particular, if the degree of a network compatibility effect upgraded by collusive agreement is sufficiently large, collusion increases consumer surplus compared with noncooperative Cournot competition.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2018. "Tacit collusion and its welfare effect in a network product market," Economics Bulletin, AccessEcon, vol. 38(4), pages 1787-1795.
    • Handle: RePEc:ebl:ecbull:eb-18-00435
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    References listed on IDEAS

    as
    1. Tsuyoshi Toshimitsu, 2018. "Strategic Compatibility Choice, Network Alliance, and Welfare," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 245-252, June.
    2. Tsuyoshi Toshimitsu, 2017. "Collusion and welfare in the case of a horizontally differentiated duopoly with network compatibility," Discussion Paper Series 163, School of Economics, Kwansei Gakuin University, revised Jun 2017.
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    Cited by:

    1. Kangsik Choi & DongJoon Lee, 2022. "Note on collusion with network externalities in price versus quantity competition," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 461-471, December.
    2. Jen-Yao Lee & Chen-Chia Fan & Chien-Shu Tsai, 2023. "Network Externalities and Downstream Collusion under Asymmetric Costs: A Note," Games, MDPI, vol. 14(2), pages 1-11, March.

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    More about this item

    Keywords

    collusion; network externality; compatibility; horizontally differentiated Cournot duopoly; welfare;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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