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Collusion, competition and piracy

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  • Francisco Martínez-Sánchez

    ()
    (Universidad de Alicante)

Abstract

In this paper we analyze firms' ability to tacitly collude on pricesin an infinitely repeated duopoly game of vertical productdifferentiation. We show that firms collude if and only if their discountfactor is high enough, i.e. if they value future profits sufficiently. We alsoshow that a lower cost of copying facilitates collusion but that a higherquality of the copy hinders collusion. Thus, the overall effect of thesenew characteristics of copies made by consumers is ambiguous.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2009-20.pdf
File Function: Fisrt version / Primera version, 2009
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2009-20.

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Length: 14 pages
Date of creation: Jan 2009
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2009-20

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Keywords: Collusion; competition; piracy; consumers; cost of copying;

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References

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  1. Liu, Qihong & Serfes, Konstantinos, 2007. "Market segmentation and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 355-378, April.
  2. Paul, BELLEFLAMME & Pierre, PICARD, 2005. "Piracy and competition," Discussion Papers (ECON - Département des Sciences Economiques) 2005057, Université catholique de Louvain, Département des Sciences Economiques.
  3. Hackner, Jonas, 1994. "Collusive pricing in markets for vertically differentiated products," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 155-177, June.
  4. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
  5. Iñigo Iturbe Ormaetxe & Giovanni Ponti & Josefa Tomás & Luis Ubeda, 2008. "Framing Effects in Public Goods: Prospect Theory and Experimental Evidence," Working Papers. Serie AD 2008-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  6. Francisco Martinez, 2008. "Learning by Copying," ThE Papers 08/05, Department of Economic Theory and Economic History of the University of Granada..
  7. Hackner, Jonas, 1996. "Optimal symmetric punishments in a Bertrand differentiated products duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 611-630, July.
  8. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  9. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
  10. Nikolaos Georgantzis & Carlos Gutiérrez-Hita, 2008. "Service provision on a network with endogenous consumption capacity," Working Papers. Serie AD 2008-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
  12. repec:ebl:ecbull:v:6:y:2003:i:10:p:1-9 is not listed on IDEAS
  13. Francisco Martínez-Sánchez, 2007. "Why Does The Pirate Decide To Be The Leader In Prices?," Working Papers. Serie AD 2007-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. Schultz, Christian, 2005. "Transparency on the consumer side and tacit collusion," European Economic Review, Elsevier, vol. 49(2), pages 279-297, February.
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