Collusive market sharing with spatial competition
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.
|Date of creation:||Oct 2012|
|Date of revision:|
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Web page: http://www.uni-potsdam.de/fakultaeten/wiso.html
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- Kai Andree, 2013.
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Regional Science and Urban Economics,
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"On the strategic choice of spatial price policy,"
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1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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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