Strategic Profit Sharing Between Firms: A Primer
AbstractThis paper builds a theory of profit sharing between two firms in a duopoly market through which firms seek to increase their profits and, in turn, to limit the competition. We use a general model to show the direct (negative) and indirect (positive) effects of this strategy. We then focus on some oligopolistic models to analyze more deeply and more precisely these two opposite effects in search of the dominant one. We thus show that giving away profits is a rewarding strategy for firms in some (but not all) models of oligopolistic competition.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we050801.
Date of creation: Feb 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ACC-2005-03-06 (Accounting & Auditing)
- NEP-ALL-2005-03-06 (All new papers)
- NEP-COM-2005-03-06 (Industrial Competition)
- NEP-IND-2005-03-06 (Industrial Organization)
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