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Collusion and Predation Under Cournot Competition

Author

Listed:
  • Emilie Dargaud

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

  • Petros G Sekeris
  • Maxime Menuet

Abstract

This paper studies how predation strategies can affect the sustainability of collusion in a duopoly. Collusion may be sustained at equilibrium for intermediate discount factors. In such instances predation implies that punishment strategies will yield low subgame perfect payoffs, thereby making collusion easier to sustain. For low discount factors collusion is not sustainable because of the high incentives to deviate to Cournot-Nash strategies. Moreover, for high discount factors it is always optimal to predate a colluding firm, thus contrasting with much of the earlier literature showing that collusion is only achievable by sufficiently patient firms.

Suggested Citation

  • Emilie Dargaud & Petros G Sekeris & Maxime Menuet, 2023. "Collusion and Predation Under Cournot Competition ," Post-Print hal-04206720, HAL.
    • Handle: RePEc:hal:journl:hal-04206720
    Note: View the original document on HAL open archive server: https://hal.science/hal-04206720
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    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
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    More about this item

    Keywords

    Collusion Predation Cournot competition. JEL: D43 L13 L41; Collusion; Predation; Cournot competition. JEL: D43; L13; L41;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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