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Tacit collusion in a one-shot game of price competition with soft capacity constraints

Author

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  • Marie-Laure Cabon-Dhersin

    () (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université)

  • Nicolas Drouhin

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyses price competition in the case of two firms operating under constant returns to scale with more than one production factor. Factors are chosen sequentially in a two-stage game generating a soft capacity constraint and implying a convex short term cost function in the second stage of the game. We show that tacit collusion is the only predictable result of the whole game i.e. the unique payoff-dominant pure strategy Nash equilibrium. Technically, this paper bridges the capacity constraint literature on price competition and that of the convex cost function.

Suggested Citation

  • Marie-Laure Cabon-Dhersin & Nicolas Drouhin, 2012. "Tacit collusion in a one-shot game of price competition with soft capacity constraints," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00709093, HAL.
  • Handle: RePEc:hal:cesptp:hal-00709093
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Burguet, Roberto & Sákovics, József, 2017. "Bertrand and the long run," International Journal of Industrial Organization, Elsevier, vol. 51(C), pages 39-55.
    2. Cabon-Dhersin Marie-Laure & Drouhin Nicolas, 2017. "A general model of price competition with soft capacity constraints," Working Papers 2017-56, Center for Research in Economics and Statistics.
    3. Tomomichi Mizuno & Kazuhiro Takauchi, 2018. "Optimal export policy with upstream price competition," Discussion Papers 1805, Graduate School of Economics, Kobe University.
    4. WAUTHY, Xavier Y., 2014. "From Bertrand to Cournot via Kreps and Scheinkman: a hazardous journey," CORE Discussion Papers 2014026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Marie-Laure Cabon-Dhersin & Jonas Didisse, 2017. "Inter-university competition and high tuition fees," Working Papers halshs-01174291, HAL.

    More about this item

    Keywords

    price competition; tacit collusion; convex cost; Bertrand Paradox; capacity constraint;

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