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Collusive Market Sharing with Spatial Competition

Author

Listed:
  • Kai Andree

    (University of Potsdam)

  • Mike Schwan

    (University of Potsdam)

Abstract

This 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.

Suggested Citation

  • Kai Andree & Mike Schwan, 2012. "Collusive Market Sharing with Spatial Competition," Economics Bulletin, AccessEcon, vol. 32(4), pages 3357-3364.
    • Handle: RePEc:ebl:ecbull:eb-12-00782
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P323.pdf
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    References listed on IDEAS

    as
    1. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    2. Tharakan, Joe & Thisse, Jacques-Francois, 2002. "The importance of being small. Or when countries are areas and not points," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 381-408, May.
    3. Kai Andree, 2013. "Collusion in Spatially Separated Markets with Quantity Competition," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 309-318, September.
    4. John Gross & William L. Holahan, 2003. "Credible Collusion in Spatially Separated Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 299-312, February.
    5. Belleflamme, Paul & Bloch, Francis, 2008. "Sustainable collusion on separate markets," Economics Letters, Elsevier, vol. 99(2), pages 384-386, May.
    6. Paul Belleflamme & Francis Bloch, 2004. "Market sharing agreements and collusive networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 387-411, May.
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    Cited by:

    1. Kai Andree & John S. Heywood & Mike Schwan & Zheng Wang, 2018. "A Spatial Model Of Cartel Stability: The Influence Of Production Cost Convexity," Bulletin of Economic Research, Wiley Blackwell, vol. 70(3), pages 298-311, July.

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    JEL classification:

    • L0 - Industrial Organization - - General
    • D0 - Microeconomics - - General

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