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Collusive market sharing with spatial competition

Author

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  • Kai Andree
  • Mike Schwan

Abstract

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.

Suggested Citation

  • Kai Andree & Mike Schwan, 2012. "Collusive market sharing with spatial competition," Volkswirtschaftliche Diskussionsbeiträge 105, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    • Handle: RePEc:pot:vwldis:105
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    File URL: http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-62146
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    Cited by:

    1. Kai Andree & John S. Heywood & Mike Schwan & Zheng Wang, 2018. "A Spatial Model Of Cartel Stability: The Influence Of Production Cost Convexity," Bulletin of Economic Research, Wiley Blackwell, vol. 70(3), pages 298-311, July.

    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • D0 - Microeconomics - - General

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