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Tacit collusion and market concentration under network effects

Author

Listed:
  • Rupayan Pal

    (Indira Gandhi Institute of Development Research)

  • Marcella Scrimitore

    (University of Salenta)

Abstract

In an infnitely repeated Cournot game with trigger strategy punishment, we demonstrate that the relationship between market concentration and collusion sustainability depends on the strength of network externalities. The latter is shown to interact with the number of firms and to affect the profitability of cooperation vs. competition, which delivers the result, challenging conventional wisdom, that lower market concentration can make collusion more stable.

Suggested Citation

  • Rupayan Pal & Marcella Scrimitore, 2016. "Tacit collusion and market concentration under network effects," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2016-010, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2016-010
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    Cited by:

    1. Lefouili, Yassine & Pinho, Joana, 2020. "Collusion between two-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    2. Fiaschi, Lorenzo & Cococcioni, Marco, 2021. "Non-Archimedean game theory: A numerical approach," Applied Mathematics and Computation, Elsevier, vol. 409(C).
    3. Xubei Lian & Kai Zhang & Leonard F. S. Wang, 2023. "Managerial delegation, network externalities and loan commitment," Manchester School, University of Manchester, vol. 91(1), pages 37-54, January.
    4. Lefouili, Yassine & Pinho, Joana, 2020. "Collusion between two-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    5. Kangsik Choi & DongJoon Lee, 2022. "Note on collusion with network externalities in price versus quantity competition," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 461-471, December.
    6. Tsuyoshi Toshimitsu, 2018. "Tacit collusion and its welfare effect in a network product market," Economics Bulletin, AccessEcon, vol. 38(4), pages 1787-1795.
    7. Jen-Yao Lee & Chen-Chia Fan & Chien-Shu Tsai, 2023. "Network Externalities and Downstream Collusion under Asymmetric Costs: A Note," Games, MDPI, vol. 14(2), pages 1-11, March.
    8. Subrato Banerjee & Basri Savitha, 2021. "Correction to: Competition reduces profitability: the case of the Indian life microinsurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 508-508, July.
    9. Tsuyoshi Toshimitsu, 2017. "Collusion and welfare in the case of a horizontally differentiated duopoly with network compatibility," Discussion Paper Series 163, School of Economics, Kwansei Gakuin University, revised Jun 2017.
    10. Jhih‐Hong Zeng & Sin‐Jin Lin, 2024. "Peer effect, bank concentration, and crises: Evidence from the United States," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(2), pages 1090-1103, March.
    11. Song, Ruichao & Wang, Leonard F.S., 2017. "Collusion in a differentiated duopoly with network externalities," Economics Letters, Elsevier, vol. 152(C), pages 23-26.
    12. Pierre Cariou & Patrice Guillotreau, 2022. "Capacity management by global shipping alliances: findings from a game experiment," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 24(1), pages 41-66, March.

    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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