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Stability of collusion and quality differentiation- a Nash bargaining approach

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  • Thanos Athanasopoulos
  • Burak Dindaroglu
  • Georgios Petropoulos

Abstract

How do incentives to collude depend on how asymmetric firms are? In many markets, product quality is an important parameter that determines firms’ market strategies. We study collusion in a quality-differentiated duopoly and we adopt a Nash bargaining approach to compute the collusive equilibrium and assess its stability. We derive collusive and deviation strategies as continuous functions of quality asymmetry. We obtain novel and surprising results. Stability of collusion is...

Suggested Citation

  • Thanos Athanasopoulos & Burak Dindaroglu & Georgios Petropoulos, 2021. "Stability of collusion and quality differentiation- a Nash bargaining approach," Working Papers 43226, Bruegel.
    • Handle: RePEc:bre:wpaper:43226
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    References listed on IDEAS

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