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The Comparative Statics of Collusion Models

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  • Kühn, Kai-Uwe
  • Rimler, Michael S
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    Abstract

    We develop and illustrate a methodology for obtaining robust comparative statics results for collusion models in markets with differentiated goods by analyzing the homogeneous goods limit of these models. This analysis reveals that the impact of parameter changes on the incentives to deviate from collusion and the punishment profits are often of different order of magnitude yielding comparative statics results that are robust to the functional form of the demand system. We demonstrate with numerical calculations that these limiting results predict the global comparative statics at any degree of product differentiation. We use this methodology to demonstrate the non-robustness of Nash reversion equilibria and to develop new results in the comparative statics of collusion.

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    Bibliographic Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5742.

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    Date of creation: Jul 2006
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    Handle: RePEc:cpr:ceprdp:5742

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    Related research

    Keywords: collusion; comparative statics; cross-ownership; differentiated products; robustness;

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    Cited by:
    1. Nocke, Volker & White, Lucy, 2010. "Vertical merger, collusion, and disruptive buyers," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 350-354, July.
    2. Kühn, Kai-Uwe, 2006. "How Market Fragmentation Can Facilitate Collusion," CEPR Discussion Papers 5948, C.E.P.R. Discussion Papers.

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