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Collusion in Quality-Segmented Markets

Author

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  • Bos, Iwan
  • Marini, Marco A.

Abstract

This paper analyzes price collusion in a repeated game with two submarkets; a standard and a premium quality segment. Within this setting, we study four types of price-fixing agreement: (i) a segment-wide cartel in the premium submarket only, (ii) a segment-wide cartel in the standard submarket only, (iii) two segment-wide cartels, and (iv) an industry-wide cartel. We present a complete characterization of the collusive pricing equilibrium and examine the corresponding effect on market shares and welfare. Partial cartels operating in a sufficiently large segment lose market share and the industry-wide cartel prefers to maintain market shares at pre-collusive levels. The impact on consumer and social welfare critically depends on the cost of producing quality. Moreover, given that there is a cartel, more collusion can be beneficial for society as a whole.

Suggested Citation

  • Bos, Iwan & Marini, Marco A., "undated". "Collusion in Quality-Segmented Markets," 2030 Agenda 307986, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemgc:307986
    DOI: 10.22004/ag.econ.307986
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    Cited by:

    1. is not listed on IDEAS
    2. Khan, Abhimanyu & Peeters, Ronald, 2024. "Stable cartel configurations and product differentiation: The case of multiple cartels," Mathematical Social Sciences, Elsevier, vol. 132(C), pages 57-68.
    3. Amit Gayer, 2023. "Duopoly and Endogenous Single Product Quality Strategies," Games, MDPI, vol. 14(4), pages 1-11, August.
    4. Yangbo Song & Mofei Zhao, 2023. "Cooperative teaching and learning of actions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(4), pages 1289-1327, November.
    5. Khan, Abhimanyu & Peeters, Ronald, 2025. "Stability of multiple cartels in differentiated markets," MPRA Paper 125199, University Library of Munich, Germany.

    More about this item

    Keywords

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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