IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v22y2022i1p297-310n10.html
   My bibliography  Save this article

Tacit Collusion with Consumer Preference Costs

Author

Listed:
  • Roig Guillem

    (Faculty of Economics, Universidad del Rosario, Casa Pedro Fermín, Calle 12 C # 4 – 59Bogotá, Colombia)

Abstract

When consumers have preference costs, two opposing effects need to be assessed to analyse the incentives of firms to set collusive prices. On the one hand, preference costs make a deviation from collusion less attractive, as the deviating firm must offer a large enough discount to cover the preference costs. On the other hand, preference costs lock in consumers and make punishment from rivals less effective. When preference costs are low, the latter of the two effects dominates and collusion is more challenging to sustain than in a situation with no preference costs. With high enough preference costs, collusion is a (weakly) dominant strategy. These results do not eventuate in a model with switching costs.

Suggested Citation

  • Roig Guillem, 2022. "Tacit Collusion with Consumer Preference Costs," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 22(1), pages 297-310, January.
  • Handle: RePEc:bpj:bejtec:v:22:y:2022:i:1:p:297-310:n:10
    DOI: 10.1515/bejte-2020-0042
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejte-2020-0042
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    File URL: https://libkey.io/10.1515/bejte-2020-0042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    Keywords

    tacit collusion; consumer preference costs; switching costs;
    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
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:22:y:2022:i:1:p:297-310:n:10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.