Sustainable collusion on separate markets
AbstractWhen firms can supply several separate markets, collusion can take two forms. Either firms establish production quotas on all the markets, or they share markets. This paper compares production quotas and market sharing agreements in a Cournot duopoly where firms incur a fixed cost for serving each market. We show that there exists a threshold value of the fixed cost such that collusion is easier to sustain with production quotas below the threshold and with market sharing agreements above the threshold. These results are obtained both under Nash reversion strategies and the globally optimal punishment strategies introduced by Abreu (1986).
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006059.
Date of creation: 00 Jun 2006
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implicit collusion; market sharing agreements; production quotas; optimal punishment;
Other versions of this item:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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