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Price vs Quantity in a Repeated Differentiated Duopoly

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  • L. Lambertini
  • C. Schultz

Abstract

We investigate the choice of market variable, price or quantity, of an optimal implicit cartel. If the discount factor is high, the cartel can realize the monopoly profit in both cases. Otherwise, it is optimal for the cartel to rely on quantities in the collusive phase if goods are substitutes and prices if goods are complements. The reason is that this minimizes the gains from deviations from collusive play.

Suggested Citation

  • L. Lambertini & C. Schultz, 2000. "Price vs Quantity in a Repeated Differentiated Duopoly," Working Papers 379, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:379
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    1. Val Eugene Lambson, 1987. "Optimal Penal Codes in Price-setting Supergames with Capacity Constraints," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 385-397.
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    8. 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 773-793, November.
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    Cited by:

    1. Baldelli, Serena & Lambertini, Luca, 2006. "Price vs quantity in a duopoly supergame with Nash punishments," Research in Economics, Elsevier, vol. 60(3), pages 121-130, September.
    2. Lambertini, Luca & Schultz, Christian, 2003. "Price or quantity in tacit collusion?," Economics Letters, Elsevier, vol. 78(1), pages 131-137, January.

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