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Price or Quantity in Tacit Collusion?

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Author Info
Luca Lambertini (Dept. of Economics, University of Bologna)
Christian Schultz (Institute of Economics, University of Copenhagen)

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Abstract

We 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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File URL: http://www.econ.ku.dk/cie/Discussion%20Papers/2001/pdf/2001-05.pdf
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Publisher Info
Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2001-05.

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Length: 7 pages
Date of creation: Oct 2001
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Handle: RePEc:kud:kuieci:2001-05

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Related research
Keywords: Partial collusion; product differentiation;

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Find related papers by JEL classification:
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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  1. S. Baldelli & L. Lambertini, 2004. "The gains from cooperative R&D with a concave technology and spillovers," Working Papers 510, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
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