Price or Quantity in Tacit Collusion?
AbstractWe investigate the choice of market variable, price or quantity, of an optimal implicit cartel. If the discount factor is high, the cartel can realize the monopoly profit in both cases. Otherwise, it is optimal for the cartel to rely on quantities in the collusive phase if goods are substitutes and prices if goods are complements. The reason is that this minimizes the gains from deviations from collusive play.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2001-05.
Length: 7 pages
Date of creation: Oct 2001
Date of revision:
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Partial collusion; product differentiation;
Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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