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Collusion in spatially separated markets with quantity competition

  • Kai Andree

This paper develops the incentives to collude in a model with spatially separated markets and quantity setting firms. We find that increases in transportation costs stabilize the collusive agreement. We also show that, the higher the demand in both markets the less likely will collusion be sustained. Gross and Holahan (2003) use a similar model with price setting firms, we compare their results with ours to analyze the impact of the mode of competition on sustainability of collusion. Further we analyze the impact of collusion on social welfare and find that collusion may be welfare enhancing.

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File URL: http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-55927
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Paper provided by Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät in its series Volkswirtschaftliche Diskussionsbeiträge with number 104.

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Date of creation: Nov 2011
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Handle: RePEc:pot:vwldis:104
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  1. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
  2. Kai Andree & Juljana Calaki, 2011. "Product differentiation in a spatial Cournot model with asymmetric demand," Economics Bulletin, AccessEcon, vol. 31(2), pages 1125-1130.
  3. José María Chamorro Rivas, 2000. "Spatial dispersion in cournot competition," Spanish Economic Review, Springer, vol. 2(2), pages 145-152.
  4. repec:ebl:ecbull:v:12:y:2007:i:1:p:1-7 is not listed on IDEAS
  5. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
  6. Hackner, Jonas, 1995. "Endogenous product design in an infinitely repeated game," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 277-299.
  7. Alessandra Chirco & Marcella Scrimitore & Corrado Benassi, 2007. "Spatial Discrimination with Quantity Competition and High Transportation Costs: a Note," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-7.
  8. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  9. Marcella Scrimitore, 2011. "Spatial Discrimination, Product Substitutability And Welfare," Bulletin of Economic Research, Wiley Blackwell, vol. 63(3), pages 231-242, 07.
  10. Chang, Myong-Hun, 1992. "Intertemporal Product Choice and Its Effects on Collusive Firm Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 773-93, November.
  11. John Gross & William L. Holahan, 2003. "Credible Collusion in Spatially Separated Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 299-312, February.
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