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Collusion in Spatially Separated Markets with Quantity Competition

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  • Kai Andree

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Abstract

This paper develops the incentives to collude in a model with spatially separated markets and quantity setting firms. We find that increases in transportation costs stabilize the collusive agreement. We also show that, the higher the demand in both markets the less likely will collusion be sustained. Gross and Holahan (Int Econ Rev 44:299–312, 2003 ) use a similar model with price setting firms, we compare their results with ours to analyze the impact of the mode of competition on sustainability of collusion. Further we analyze the impact of collusion on social welfare and find that collusion may be welfare enhancing. Copyright Springer Science+Business Media New York 2013

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File URL: http://hdl.handle.net/10.1007/s10842-012-0126-9
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Bibliographic Info

Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 13 (2013)
Issue (Month): 3 (September)
Pages: 309-318

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Handle: RePEc:kap:jincot:v:13:y:2013:i:3:p:309-318

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Web page: http://springerlink.metapress.com/link.asp?id=105724

Related research

Keywords: collusion; spatial competition; duopoly; L10; R10; D43;

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  1. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 10(4), pages 633-641, December.
  2. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  3. Marcella Scrimitore, 2011. "Spatial Discrimination, Product Substitutability And Welfare," Bulletin of Economic Research, Wiley Blackwell, vol. 63(3), pages 231-242, 07.
  4. Alessandra Chirco & Marcella Scrimitore & Corrado Benassi, 2007. "Spatial Discrimination with Quantity Competition and High Transportation Costs: a Note," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-7.
  5. José María Chamorro Rivas, 2000. "Spatial dispersion in cournot competition," Spanish Economic Review, Springer, Springer, vol. 2(2), pages 145-152.
  6. Kai Andree & Juljana Calaki, 2011. "Product differentiation in a spatial Cournot model with asymmetric demand," Economics Bulletin, AccessEcon, vol. 31(2), pages 1125-1130.
  7. John Gross & William L. Holahan, 2003. "Credible Collusion in Spatially Separated Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 299-312, February.
  8. Hackner, Jonas, 1995. "Endogenous product design in an infinitely repeated game," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(2), pages 277-299.
  9. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 9(3), pages 453-469, September.
  10. Chang, Myong-Hun, 1992. "Intertemporal Product Choice and Its Effects on Collusive Firm Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 773-93, November.
  11. repec:ebl:ecbull:v:12:y:2007:i:1:p:1-7 is not listed on IDEAS
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Cited by:
  1. Kai Andree & Mike Schwan, 2012. "Collusive market sharing with spatial competition," Volkswirtschaftliche Diskussionsbeiträge, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät 105, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.

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