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Colluding on Relative Prices


  • Ralph A. Winter


Firms sometimes agree to limit the discounts they offer a class of customers, i.e., they collude on the price differences across consumer classes. Why? Courts have struck down agreements to limit discounts as violations of the laws against price-fixing. Are these collusive agreements in fact efficient? This article addresses these questions in a multiproduct duopoly model. Under one interpretation, the incentive to collude on relative prices can be traced to heterogeneity in consumers' time costs. Under fairly general conditions, total surplus increases with the collusion. This efficiency effect is most striking in the case where collusion raises the prices faced by all consumers over which firms compete.

Suggested Citation

  • Ralph A. Winter, 1997. "Colluding on Relative Prices," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 359-371, Summer.
  • Handle: RePEc:rje:randje:v:28:y:1997:i:summer:p:359-371

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    1. Aguirre Pérez, Iñaki, 2011. "Multimarket Competition and Welfare Effects of Price discrimination," IKERLANAK 2011-55, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. Janeba, Eckhard & Smart, Michael, 2003. "Is Targeted Tax Competition Less Harmful Than Its Remedies?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 259-280, May.
    3. Douglas Cumming & Sofia Johan, 2015. "Cameras tracking shoppers: the economics of retail video surveillance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 235-257, December.
    4. Simshauser, Paul & Whish-Wilson, Patrick, 2017. "Price discrimination in Australia's retail electricity markets: An analysis of Victoria & Southeast Queensland," Energy Economics, Elsevier, vol. 62(C), pages 92-103.
    5. Bracaglia, Valentina & D׳Alfonso, Tiziana & Nastasi, Alberto, 2014. "Competition between multiproduct airports," Economics of Transportation, Elsevier, vol. 3(4), pages 270-281.
    6. Paul Simshauser and David Downer, 2016. "On the Inequity of Flat-rate Electricity Tariffs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    7. Valentina Bracaglia & Tiziana D'Alfonso & Alberto Nastasi, 2014. "Multiproduct airport competition and e-commerce strategies," DIAG Technical Reports 2014-04, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    8. Ganesh Iyer & David Soberman & J. Miguel Villas-Boas, 2005. "The Targeting of Advertising," Marketing Science, INFORMS, vol. 24(3), pages 461-476, May.
    9. repec:aeg:report:2014-4 is not listed on IDEAS

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