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Partial collusion in an asymmetric duopoly

Author

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  • Marc Escrihuela Villar

    () (Universitat de les Illes Balears)

Abstract

In this paper we investigate the connection between cost asymmetries and the sustainability of collusion within the context of a infinitely repeated Cournot duopoly. We assume that firms are able to coordinate on distinct output levels than the unrestricted joint profit maximization outcome. We show that, in our model, regardless of the degree of cost asymmetry, at least some collusion is always sustainable if firms are patient enough. We also endogenize the degree of collusion and show that it has an upper bound determined by the most inefficient firm.

Suggested Citation

  • Marc Escrihuela Villar, 2012. "Partial collusion in an asymmetric duopoly," DEA Working Papers 47, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  • Handle: RePEc:ubi:deawps:47
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    File URL: http://www.uib.es/depart/deaweb/deawp/pdf/w47.pdf
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    Keywords

    Collusion; Sustainability; Asymmetry;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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