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Price vs Quantity in a Duopoly Supergame with Nash Punishments

Listed author(s):
  • S. Baldelli
  • L. Lambertini

We examine the endogenous choice between price and quantity behaviour in a duopoly supergame with product differentiation. We find that (i) if cartel profits are evenly split between firms, then only symmetric equilibria obtains; (i) if instead the additional profits available through collusion are split according to the Nash bargaining solution, there are parameter regions where all subgame perfect equilibria are asymmetric, with firms colluding in price-quantity supergames.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 510.

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Date of creation: 2004
Handle: RePEc:bol:bodewp:510
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  1. Hackner, Jonas, 1996. "Optimal symmetric punishments in a Bertrand differentiated products duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 611-630, July.
  2. R.Rothschild, "undated". "Sustaining Collusion When the Choice of Strategic Variable is Endogenous," Working Papers ec3/93, Department of Economics, University of Lancaster.
  3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  4. L. Lambertini & C. Schultz, 2000. "Price vs Quantity in a Repeated Differentiated Duopoly," Working Papers 379, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Ross, Thomas W., 1992. "Cartel stability and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 1-13, March.
  6. Jean-Pierre Benoit & Vijay Krishna, 1987. "Dynamic Duopoly: Prices and Quantities," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 23-35.
  7. Majerus, David W., 1988. "Price vs. quantity competition in oligopoly supergames," Economics Letters, Elsevier, vol. 27(3), pages 293-297.
  8. Lambertini, Luca, 1997. "Prisoners' Dilemma in Duopoly (Super)Games," Journal of Economic Theory, Elsevier, vol. 77(1), pages 181-191, November.
  9. Rothschild, R., 1992. "On the sustainability of collusion in differentiated duopolies," Economics Letters, Elsevier, vol. 40(1), pages 33-37, September.
  10. Chang, Myong-Hun, 1992. "Intertemporal Product Choice and Its Effects on Collusive Firm Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 773-793, November.
  11. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  12. Lambertini, L. & Sasaki, D., 1998. "Non-Negative Quantity Constraints and the Duration of Punishment," Department of Economics - Working Papers Series 630, The University of Melbourne.
  13. Luca Lambertini & Dan Sasaki, 1999. "Optimal punishments in linear duopoly supergames with product differentiation," Journal of Economics, Springer, vol. 69(2), pages 173-188, June.
  14. Luca Lambertini & Christian Schultz, 2001. "Price or Quantity in Tacit Collusion?," CIE Discussion Papers 2001-05, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  15. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  16. Carl Davidson & Raymond Deneckere, 1984. "Excess Capacity and Collusion," Discussion Papers 675, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
  18. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-554, May.
  19. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
  20. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
  21. Macleod, W. Bentley, 1985. "A theory of conscious parallelism," European Economic Review, Elsevier, vol. 27(1), pages 25-44, February.
  22. William A. Brock & José A. Scheinkman, 1985. "Price Setting Supergames with Capacity Constraints," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 371-382.
  23. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  24. Albaek, Svend & Lambertini, Luca, 1998. "Collusion in differentiated duopolies revisited," Economics Letters, Elsevier, vol. 59(3), pages 305-308, June.
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