Collusion and leadership
The paper explores the role of price or quantity leadership in facilitating collusion. It extends the standard analysis of tacit collusion by allowing firms to make their strategic choices either simultaneously or sequentially. It is shown that price leadership indeed facilitates collusion by making it easier to punish deviations by the leader. In case of pure Bertrand competition, price leadership restores the scope for (perfect) collusion in markets where collusion would not be sustainable otherwise. When firms face asymmetric costs or offer differentiated products, price leadership can also enhance the profitability of collusion—in case of asymmetric costs, the less efficient firm must act as the leader. Finally, such leadership is less effective in case of Cournot competition since, following an aggressive deviation by the leader, the follower would rather limit its own output, making it more difficult to punish the deviation. Still, quantity leadership may enhance collusion when it is already somewhat effective in a simultaneous move setting.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 29 (2011)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/505551|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- van Damme, Eric & Hurkens, Sjaak, 1999.
"Endogenous Stackelberg Leadership,"
Games and Economic Behavior,
Elsevier, vol. 28(1), pages 105-129, July.
- van Damme, E.E.C. & Hurkens, J.P.M., 1999. "Endogenous Stackelberg leadership," Other publications TiSEM 83a05fd8-4285-48f3-84ef-3, Tilburg University, School of Economics and Management.
- van Damme, E.E.C. & Hurkens, J.P.M., 1996. "Endogenous Stackelberg Leadership," Discussion Paper 1996-115, Tilburg University, Center for Economic Research.
- Eric van Damme & Sjaak Hurkens, 1996. "Endogenous Stackelberg leadership," Economics Working Papers 190, Department of Economics and Business, Universitat Pompeu Fabra.
- van Damme, E.E.C. & Hurkens, J.P.M., 1998.
"Endogenous price leadership,"
98.68, Tilburg University, Center for Economic Research.
- Eric van Damme & Sjaak Hurkens, 2001. "Endogenous price leadership," Economics Working Papers 581, Department of Economics and Business, Universitat Pompeu Fabra.
- van Damme, E.E.C. & Hurkens, S., 2004. "Endogenous price leadership," Other publications TiSEM 0bc41e9f-cede-46e7-bab6-b, Tilburg University, School of Economics and Management.
- Eric van Damme & Sjaak Hurkens, 1998. "Endogenous price leadership," Economics Working Papers 289, Department of Economics and Business, Universitat Pompeu Fabra.
- Jeanine Miklós-Thal, 2011.
"Optimal collusion under cost asymmetry,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(1), pages 99-125, January.
- Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
- Marshall, Robert C. & Marx, Leslie M. & Raiff, Matthew E., 2008. "Cartel price announcements: The vitamins industry," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 762-802, May.
- Dave Furth & Dan Kovenock, 1993.
"Price leadership in a duopoly with capacity constraints and product differentiation,"
Journal of Economics,
Springer, vol. 57(1), pages 1-35, February.
- Furth, D. & Kovenock, D., 1990. "Price Leadership In A Duopoly With Capacity Constraints And Product Differentiation," Purdue University Economics Working Papers 992, Purdue University, Department of Economics.
- Cooper, David J., 1997. "Barometric price leadership," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 301-325, May.
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
- Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
- Raymond Deneckere & Dan Kovenock, 1988.
773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Hamilton, Jonathan H. & Slutsky, Steven M., 1990.
"Endogenous timing in duopoly games: Stackelberg or cournot equilibria,"
Games and Economic Behavior,
Elsevier, vol. 2(1), pages 29-46, March.
- Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, September.
- Athey, Susan & Bagwell, Kyle, 2001.
"Optimal Collusion with Private Information,"
RAND Journal of Economics,
The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, September.
- Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992.
"A Model of Price Leadership Based on Consumer Loyalty,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 40(2), pages 147-156, June.
- Deneckere, R. & Kovenock, D. & Lee, R.E., 1988. "A Model of Price Leadership Based on Consumer Loyalty," Purdue University Economics Working Papers 947, Purdue University, Department of Economics.
- Ishibashi, Ikuo, 2008. "Collusive price leadership with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 704-715, May.
- Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
- Harrington, Joseph E, Jr, 1991. "The Determination of Price and Output Quotas in a Heterogeneous Cartel," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 767-792, November.
- George J. Stigler, 1947. "The Kinky Oligopoly Demand Curve and Rigid Prices," Journal of Political Economy, University of Chicago Press, vol. 55, pages 432-432.
- Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-599, May.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:29:y:2011:i:6:p:705-717. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.