IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v152y2017icp23-26.html
   My bibliography  Save this article

Collusion in a differentiated duopoly with network externalities

Author

Listed:
  • Song, Ruichao
  • Wang, Leonard F.S.

Abstract

Conventional wisdom is that collusion between firms will be destabilized when they produce closer substitutes of products. We show that, in the presence of strong network externalities, this result no longer holds, and collusion becomes more sustainable for closer substitutes of products under relatively strong network externalities.

Suggested Citation

  • Song, Ruichao & Wang, Leonard F.S., 2017. "Collusion in a differentiated duopoly with network externalities," Economics Letters, Elsevier, vol. 152(C), pages 23-26.
    • Handle: RePEc:eee:ecolet:v:152:y:2017:i:c:p:23-26
    DOI: 10.1016/j.econlet.2016.12.032
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176516305419
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2016.12.032?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Toshihiro Matsumura & Noriaki Matsushima, 2012. "Competitiveness And Stability Of Collusive Behavior," Bulletin of Economic Research, Wiley Blackwell, vol. 64(Supplemen), pages 22-31, December.
    2. repec:bla:buecrs:v:64:y:2012:i::p:s22-s31 is not listed on IDEAS
    3. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    4. Bhattacharjee Trishita & Pal Rupayan, 2014. "Network Externalities and Strategic Managerial Delegation in Cournot Duopoly: Is There a Prisoners’ Dilemma?," Review of Network Economics, De Gruyter, vol. 12(4), pages 343-353, January.
    5. Pal, Rupayan, 2015. "Cournot vs. Bertrand under relative performance delegation: Implications of positive and negative network externalities," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 94-101.
    6. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
    7. Pal, Rupayan & Scrimitore, Marcella, 2016. "Tacit collusion and market concentration under network effects," Economics Letters, Elsevier, vol. 145(C), pages 266-269.
    8. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    9. Rupayan Pal, 2014. "Price and quantity competition in network goods duopoly: a reversal result," Economics Bulletin, AccessEcon, vol. 34(2), pages 1019-1027.
    10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    11. Lambertini, Luca & Sasaki, Dan, 2001. "Marginal costs and collusive sustainability," Economics Letters, Elsevier, vol. 72(1), pages 117-120, July.
    12. Hoernig, Steffen, 2012. "Strategic delegation under price competition and network effects," Economics Letters, Elsevier, vol. 117(2), pages 487-489.
    13. Osterdal, Lars Peter, 2003. "A note on the stability of collusion in differentiated oligopolies," Research in Economics, Elsevier, vol. 57(1), pages 53-64, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lefouili, Yassine & Pinho, Joana, 2020. "Collusion between two-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    2. Fiaschi, Lorenzo & Cococcioni, Marco, 2021. "Non-Archimedean game theory: A numerical approach," Applied Mathematics and Computation, Elsevier, vol. 409(C).
    3. Shrivastav, Sumit, 2021. "Network compatibility, intensity of competition and process R&D: A generalization," Mathematical Social Sciences, Elsevier, vol. 109(C), pages 152-163.
    4. Leonard F. S. Wang & Domenico Buccella, 2023. "The Timing of Technology Adoption in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(4), pages 367-392, June.
    5. Leonardo Madio & Aldo Pignataro, 2022. "Collusion sustainability with a capacity constrained firm," "Marco Fanno" Working Papers 0295, Dipartimento di Scienze Economiche "Marco Fanno".
    6. Lefouili, Yassine & Pinho, Joana, 2020. "Collusion between two-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    7. 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.
    8. Ying Fan & Charles Ka Yui Leung & Zan Yang, 2022. "Financial conditions, local competition, and local market leaders: The case of real estate developers," Pacific Economic Review, Wiley Blackwell, vol. 27(2), pages 131-193, May.
    9. 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.
    10. Tsuyoshi Toshimitsu, 2018. "Tacit collusion and its welfare effect in a network product market," Economics Bulletin, AccessEcon, vol. 38(4), pages 1787-1795.
    11. 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.
    12. Leonardo Madio & Aldo Pignataro, 2022. "Collusion Sustainability with a Capacity Constrained Firm," CESifo Working Paper Series 10170, CESifo.
    13. Debasmita Basak & Emmanuel Petrakis, 2021. "Social efficiency of entry: Implications of network externalities," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 820-829, November.
    14. Stanislav Stoykov & Ivan Kostov, 2023. "Price Competition with Differentiated Products on a Two-Dimensional Plane: The Impact of Partial Cartel on Firms’ Profits and Behavior," Games, MDPI, vol. 14(2), pages 1-25, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shrivastav, Sumit, 2021. "Network compatibility, intensity of competition and process R&D: A generalization," Mathematical Social Sciences, Elsevier, vol. 109(C), pages 152-163.
    2. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2009. "Optimal Collusion with Limited Severity Constraint," Post-Print halshs-00375798, HAL.
    3. 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.
    4. Lee, Jen-Yao & Wang, Leonard F. S. & Sun, Ji, 2022. "Relative-performance delegation destabilizes upstream collusion," MPRA Paper 114939, University Library of Munich, Germany, revised 12 Oct 2022.
    5. Anomita Ghosh & Rupayan Pal, 2017. "Welfare Ranking of Alternative Export Taxes Revisited," Economics Bulletin, AccessEcon, vol. 37(2), pages 1033-1044.
    6. Bin Ying & Leonard F. S. Wang & Qidi Zhang, 2023. "Upstream collusion and corporate social responsibility in downstream competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1020-1028, March.
    7. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Government-leading welfare-improving collusion," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 363-370.
    8. Leonard F. S. Wang & Domenico Buccella, 2023. "The Timing of Technology Adoption in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(4), pages 367-392, June.
    9. Naskar, Mili & Pal, Rupayan, 2020. "Network externalities and process R&D: A Cournot–Bertrand comparison," Mathematical Social Sciences, Elsevier, vol. 103(C), pages 51-58.
    10. Jine Qian & Qiang Gong & Leonard F.S. Wang, 2021. "Corporate social responsibility, loan commitment, and social welfare in network duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 952-960, June.
    11. Debasmita Basak & Emmanuel Petrakis, 2021. "Social efficiency of entry: Implications of network externalities," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 820-829, November.
    12. DongJoon Lee & Kangsik Choi & Tatsuhiko Nariu, 2020. "Endogenous vertical structure with network externalities," Manchester School, University of Manchester, vol. 88(6), pages 827-846, December.
    13. Montinaro, Marta & Pal, Rupayan & Scrimitore, Marcella, 2020. "Per Unit and Ad Valorem Royalties in a Patent Licensing Game," FACTS: Firms And Cities Towards Sustainability 307305, Fondazione Eni Enrico Mattei (FEEM) > FACTS: Firms And Cities Towards Sustainability.
    14. Yasuhiko Nakamura, 2021. "Price versus quantity in a duopoly with network externalities under active and passive expectations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 120-133, January.
    15. Osterdal, Lars Peter, 2003. "A note on the stability of collusion in differentiated oligopolies," Research in Economics, Elsevier, vol. 57(1), pages 53-64, March.
    16. Montinaro, Marta & Scrimitore, Marcella, 2019. "Per unit and ad valorem royalties in a patent licensing game," MPRA Paper 96642, University Library of Munich, Germany.
    17. Anomita Ghosh & Rupayan Pal, "undated". "Welfare ranking of alternative export tariffs revisited," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    18. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2013. "Optimal collusion with limited liability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(3), pages 203-227, September.
    19. 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.
    20. Kangsik Choi & DongJoon Lee, 2022. "Network externalities and endogenous timing in managerial firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1462-1475, July.

    More about this item

    Keywords

    Network externalities; Differentiated duopoly; Stability of collusion;
    All these keywords.

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:152:y:2017:i:c:p:23-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.