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Profitable collusion on costs: a spatial model

Author

Listed:
  • John S. Heywood

    (University of Wisconsin – Milwaukee)

  • Zheng Wang

    (Capital University of Economics and Business)

Abstract

This paper uniquely demonstrates the scope for profitable collusion on transport costs under delivered pricing. In addition to being profitable, such collusion is shown to be more stable than price collusion and harder to detect as it presents to authorities as continued Bertrand price competition. Such collusion generates endogenous duopoly locations outside the quartiles with less stable but more profitable collusion happening toward the endpoints. These results emerge in both the traditional model of inelastic demand and an extended model of elastic demand.

Suggested Citation

  • John S. Heywood & Zheng Wang, 2020. "Profitable collusion on costs: a spatial model," Journal of Economics, Springer, vol. 131(3), pages 267-286, December.
    • Handle: RePEc:kap:jeczfn:v:131:y:2020:i:3:d:10.1007_s00712-020-00709-5
    DOI: 10.1007/s00712-020-00709-5
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    References listed on IDEAS

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    Cited by:

    1. Nuowen Bai & Toshihiro Matsumura, 2023. "Common ownership in a delivered pricing duopoly," Journal of Economics, Springer, vol. 139(3), pages 191-208, August.
    2. John S. Heywood & Dongyang Li & Guangliang Ye, 2021. "Spatial pricing and collusion," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 425-440, May.

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    More about this item

    Keywords

    Spatial price discrimination; Collusion; Transport costs;
    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
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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