The aim of the present paper is to show that the existence of a concrete outside option for ÞrmsÕ executives can induce, under speciÞc circumstances, every Þrm to adopt restrictive output practises. In particular, the paper characterizes the conditions for which, under Cournot oligopoly, existing Þrms behave more collusively than in a standard Cournot model. It is also shown that room exists for perfect and stable collusive agreements amongst Þrms. Other interesting Þndings are also twofold. Firstly, that the equilibrium executivesÕ pay will usually be dependent upon the number of companies initially disposing of the technology and/or of the organizational knowledge required to set up the business. Secondly, that companiesÕ procedures di?cult to duplicate can constitute a beneÞcial form of competition policy in that they induce the Þrms to behave less collusively in the product market
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
1998002.