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The Neglected Effects of Demand Characteristics on the Sustainability of Collusion

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  • Gallice, Andrea

Abstract

According to standard IO models, the characteristics of market demand (intercept, slope, elasticity) and of the technology (level of symmetric marginal costs) do not play any role in defining the sustainability of collusive behaviors in Bertrand oligopolies. The paper modifies this counterintuitive result by showing that all the above mentioned factors do affect the sustainability of collusion when prices are assumed to be discrete rather than continuous. The sign of these effects is unambiguous. Their magnitude varies greatly: in some cases it is totally negligible, in others it becomes extremely relevant.

Suggested Citation

  • Gallice, Andrea, 2008. "The Neglected Effects of Demand Characteristics on the Sustainability of Collusion," CEPR Discussion Papers 6975, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6975
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    References listed on IDEAS

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    1. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
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    15. repec:ebl:ecbull:v:12:y:2004:i:3:p:1-6 is not listed on IDEAS
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    Cited by:

    1. Zimmerman, Paul R., 2010. "On the sustainability of collusion in Bertrand supergames with discrete pricing and nonlinear demand," MPRA Paper 20249, University Library of Munich, Germany.

    More about this item

    Keywords

    Bertrand supergames; collusion; market demand;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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