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Competition and collusion with fixed output

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  • Zenger, Hans

Abstract

In many industries, output is fixed by exogenous constraints, so firms compete by allocating a given stock of supplies between different markets. This paper shows that collusion in such industries leads firms to shift output from high-margin markets to low-margin markets. As a result, welfare is generally reduced although prices decrease in some markets and increase in others.

Suggested Citation

  • Zenger, Hans, 2013. "Competition and collusion with fixed output," Economics Letters, Elsevier, vol. 120(2), pages 259-261.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:259-261
    DOI: 10.1016/j.econlet.2013.04.036
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    References listed on IDEAS

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    1. Jean-Pierre Benoit & Vijay Krishna, 1987. "Dynamic Duopoly: Prices and Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 23-35.
    2. Davidson, Carl & Deneckere, Raymond J, 1990. "Excess Capacity and Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 521-541, August.
    3. Péter Eső & Volker Nocke & Lucy White, 2010. "Competition for scarce resources," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 524-548, September.
    4. Ian Gale & Daniel P. O'Brien, 2013. "The Welfare Effects of Use-or-Lose Provisions in Markets with Dominant Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 175-193, February.
    5. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March.
    6. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Collusion; Fixed output; Price discrimination;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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