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Collusion, agglomeration, and heterogeneity of firms

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  • Matsumura, Toshihiro
  • Matsushima, Noriaki

Abstract

Jehiel (1992) and Friedman and Thisse (1993) show that spatial agglomeration appears in a standard two-stage location price model if symmetric firms collude in prices. We introduce a cost difference between two firms. We show that agglomeration never appears in a collusive equilibrium even when the cost difference between firms is sufficiently small.

Suggested Citation

  • Matsumura, Toshihiro & Matsushima, Noriaki, 2011. "Collusion, agglomeration, and heterogeneity of firms," Games and Economic Behavior, Elsevier, vol. 72(1), pages 306-313, May.
    • Handle: RePEc:eee:gamebe:v:72:y:2011:i:1:p:306-313
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    References listed on IDEAS

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    1. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
    2. Hamilton, Jonathan H. & Thisse, Jacques-Francois & Weskamp, Anita, 1989. "Spatial discrimination : Bertrand vs. Cournot in a model of location choice," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 87-102, February.
    3. Kalai, Ehud, 1977. "Proportional Solutions to Bargaining Situations: Interpersonal Utility Comparisons," Econometrica, Econometric Society, vol. 45(7), pages 1623-1630, October.
    4. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Cost differentials and mixed strategy equilibria in a Hotelling model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 215-234, March.
    5. repec:ulb:ulbeco:2013/1759 is not listed on IDEAS
    6. de Palma, A, et al, 1985. "The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity," Econometrica, Econometric Society, vol. 53(4), pages 767-781, July.
    7. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    8. Mai, Chao-cheng & Peng, Shin-kun, 1999. "Cooperation vs. competition in a spatial model," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 463-472, July.
    9. James W. Friedman & Jacques-Francois Thisse, 1993. "Partial Collusion Fosters Minimum Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 631-645, Winter.
    10. Anderson, Simon P & Neven, Damien J, 1991. "Cournot Competition Yields Spatial Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 793-808, November.
    11. Rath, Kali P. & Zhao, Gongyun, 2003. "Nonminimal product differentiation as a bargaining outcome," Games and Economic Behavior, Elsevier, vol. 42(2), pages 267-280, February.
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    Cited by:

    1. Matsumura, Toshihiro & Matsushima, Noriaki, 2012. "Welfare properties of strategic R&D investments in Hotelling models," Economics Letters, Elsevier, vol. 115(3), pages 465-468.
    2. Cheng, Long & Heywood, John S. & Ye, Guangliang, 2019. "Partial acquisition with an excluded public rival," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 164-173.
    3. Matsumura Toshihiro & Matsushima Noriaki, 2010. "When Small Firms Fight Back Against Large Firms in R&D Activities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-42, September.
    4. Toshihiro Matsumura & Daisuke Shimizu, 2015. "Endogenous Flexibility In The Flexible Manufacturing System," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 1-13, January.
    5. Kali P. Rath & Gongyun Zhao, 2021. "On the insufficiency of some conditions for minimal product differentiation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(1), pages 53-65, April.
    6. Chia-Hung Sun & Fu-Chuan Lai, 2013. "Hotelling was right with decreasing returns to scale and a coalition-proof refinement," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 953-971, June.

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    More about this item

    Keywords

    Cost asymmetry Spatial agglomeration Collusion;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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