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Price or Quantity in Tacit Collusion?

Author

Listed:
  • Luca Lambertini

    (Dept. of Economics, University of Bologna)

  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

Abstract

We investigate the choice of market variable, price or quantity, of an optimal implicit cartel. If the discount factor is high, the cartel can realize the monopoly profit in both cases. Otherwise, it is optimal for the cartel to rely on quantities in the collusive phase if goods are substitutes and prices if goods are complements. The reason is that this minimizes the gains from deviations from collusive play.

Suggested Citation

  • 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.
    • Handle: RePEc:kud:kuieci:2001-05
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    2. Stefano Colombo, 2016. "Mixed oligopolies and collusion," Journal of Economics, Springer, vol. 118(2), pages 167-184, June.
    3. Yasuhiko Nakamura, 2018. "Endogenous Market Structures in the Presence of a Socially Responsible Firm," Journal of Industry, Competition and Trade, Springer, vol. 18(3), pages 319-348, September.
    4. Baldelli, Serena & Lambertini, Luca, 2006. "Price vs quantity in a duopoly supergame with Nash punishments," Research in Economics, Elsevier, vol. 60(3), pages 121-130, September.
    5. Alessandra Chirco & Caterina Colombo & Marcella Scrimitore, 2013. "Organizational Structure and the Choice of Price vs. Quantity in a Mixed Duopoly," Working Paper series 27_13, Rimini Centre for Economic Analysis.
    6. Aguiar-Conraria, Luís & Wen, Yi, 2012. "OPEC's oil exporting strategy and macroeconomic (in)stability," Energy Economics, Elsevier, vol. 34(1), pages 132-136.
    7. Scrimitore, Marcella, 2013. "Price or quantity? The strategic choice of subsidized firms in a mixed duopoly," Economics Letters, Elsevier, vol. 118(2), pages 337-341.
    8. Ari Hyytinen & Frode Steen & Otto Toivanen, 2019. "An Anatomy of Cartel Contracts," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2155-2191.
    9. Alessandra Chirco & Caterina Colombo & Marcella Scrimitore, 2014. "Organizational Structure and the Choice of Price versus Quantity in a Mixed Duopoly," The Japanese Economic Review, Japanese Economic Association, vol. 65(4), pages 521-542, December.
    10. Fujisawa, Chieko, 2024. "Corporate strategies to exploit the social status created by advertising: quantity vs. price competition," 24th ITS Biennial Conference, Seoul 2024. New bottles for new wine: digital transformation demands new policies and strategies 302462, International Telecommunications Society (ITS).
    11. Minas Vlassis & Maria Varvataki, 2014. "On the Mode of Competition as a Collusive Perspective in Unionized Oligopoly," Working Papers 1408, University of Crete, Department of Economics.
    12. Bin Ying & Leonard F. S. Wang & Qidi Zhang, 2023. "Upstream collusion and corporate social responsibility in downstream competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1020-1028, March.

    More about this item

    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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