Collusive market sharing with spatial competition
AbstractThis paper develops a spatial model to analyze the stability of a market sharing agreement between two firms. We find that the stability of the cartel depends on the relative market size of each firm. Collusion is not attractive for firms with a small home market, but the incentive for collusion increases when the firm’s home market is getting larger relative to the home market of the competitor. The highest stability of a cartel and additionally the highest social welfare is found when regions are symmetric. Further we can show that a monetary transfer can stabilize the market sharing agreement.
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Bibliographic InfoPaper provided by Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät in its series Volkswirtschaftliche Diskussionsbeiträge with number 105.
Date of creation: Oct 2012
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
- NEP-BEC-2012-11-11 (Business Economics)
- NEP-COM-2012-11-11 (Industrial Competition)
- NEP-GEO-2012-11-11 (Economic Geography)
- NEP-IND-2012-11-11 (Industrial Organization)
- NEP-MIC-2012-11-11 (Microeconomics)
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