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Collusive market sharing with spatial competition

  • Kai Andree
  • Mike Schwan

This paper develops a spatial model to analyze the stability of a market sharing agreement between two firms. We find that the stability of the cartel depends on the relative market size of each firm. Collusion is not attractive for firms with a small home market, but the incentive for collusion increases when the firm’s home market is getting larger relative to the home market of the competitor. The highest stability of a cartel and additionally the highest social welfare is found when regions are symmetric. Further we can show that a monetary transfer can stabilize the market sharing agreement.

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File URL: http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-62146
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Paper provided by Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät in its series Volkswirtschaftliche Diskussionsbeiträge with number 105.

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Date of creation: Oct 2012
Date of revision:
Handle: RePEc:pot:vwldis:105
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Web page: http://www.uni-potsdam.de/fakultaeten/wiso.html
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  1. THISSE, Jacques-François & VIVES, Xavier, . "On the strategic choice of spatial price policy," CORE Discussion Papers RP -793, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. BELLEFLAMME, Paul & BLOCH, Francis, 2006. "Sustainable collusion on separate markets," CORE Discussion Papers 2006059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Kai Andree, 2013. "Collusion in Spatially Separated Markets with Quantity Competition," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 309-318, September.
  4. THARAKAN , Joe & THISSE, Jacques-François, . "The importance of being small. Or when countries are areas and not points," CORE Discussion Papers RP -1542, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. 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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