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Cooperation vs. Collusion: How Essentiality Shapes Co-opetition

Author

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  • Rey, Patrick
  • Tirole, Jean

Abstract

The paper makes two related contributions. First, and in contrast with the rich body of literature on collusion with (mainly perfect) substitutes, it derives general results on the sustainability of tacit coordination for a class of nested demand functions that allows for the full range between perfect substitutes and perfect complements. Second, it studies the desirability of joint marketing alliances, an alternative to mergers. It shows that a combination of two informationfree regulatory requirements, mandated unbundling by the joint marketing entity and unfettered independent marketing by the firms, makes joint-marketing alliances always socially desirable, whether tacit coordination is feasible or not.

Suggested Citation

  • Rey, Patrick & Tirole, Jean, 2013. "Cooperation vs. Collusion: How Essentiality Shapes Co-opetition," IDEI Working Papers 801, Institut d'Économie Industrielle (IDEI), Toulouse.
  • Handle: RePEc:ide:wpaper:27696
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    References listed on IDEAS

    as
    1. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-396, March.
    2. 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.
    3. Engelmann, Dirk & Müller, Wieland, 2011. "Collusion through price ceilings? In search of a focal-point effect," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 291-302, August.
    4. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    5. Katz Michael L, 2011. "Insurance, Consumer Choice, and the Equilibrium Price and Quality of Hospital Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(2), pages 1-44, January.
    6. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 2002. "Research joint ventures, product differentiation, and price collusion," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 829-854, June.
    7. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    8. Hackner, Jonas, 1994. "Collusive pricing in markets for vertically differentiated products," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 155-177, June.
    9. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
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    Citations

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    Cited by:

    1. Chen, Zhijun & Rey, Patrick, 2013. "Competitive Cross-Subsidization," IDEI Working Papers 808, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Jay Pil Choi & Heiko Gerlach, 2015. "Patent pools, litigation, and innovation," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 499-523, September.
    3. Josh Lerner & Jean Tirole, 2015. "Standard-Essential Patents," Journal of Political Economy, University of Chicago Press, vol. 123(3), pages 547-586.
    4. López, Ángel Luis & Vives, Xavier, 2016. "Cross-ownership, R&D Spillovers, and Antitrust Policy," CEPR Discussion Papers 11315, C.E.P.R. Discussion Papers.
    5. Aleksandra Boutin, 2016. "Screening for Good Patent Pools through Price Caps on Individual Licenses," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 64-94, August.
    6. Drew Fudenberg, 2015. "Tirole's Industrial Regulation and Organization Legacy in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 771-800, July.
    7. David Encaoua, 2014. "Kaplow, Louis: Competition policy and price fixing," Journal of Economics, Springer, vol. 113(2), pages 205-209, October.
    8. Shastitko, Andrei, 2015. "A new look at the antimonopoly control of horizontal agreements," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 3, pages 134-154.
    9. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    10. Spielmann, Nathalie & Williams, Christopher, 2016. "It goes with the territory: Communal leverage as a marketing resource," Journal of Business Research, Elsevier, vol. 69(12), pages 5636-5643.
    11. Ángel L. López & Xavier Vives, 2016. "Overlapping Ownership, R&D Spillovers, and Antitrust Policy," CESifo Working Paper Series 5935, CESifo Group Munich.
    12. repec:bla:jemstr:v:26:y:2017:i:3:p:571-589 is not listed on IDEAS
    13. Thomas D. Jeitschko & Yeonjei Jung & Jaesoo Kim, 2017. "Bundling and joint marketing by rival firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(3), pages 571-589, September.

    More about this item

    Keywords

    tacit collusion; cooperation; substitutes and complements; essentiality; joint marketing agreements; patent pools; independent licensing; unbundling; co-opetition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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