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Collusive Price Leadership Among Firms with Different Discount Factors

Author

Listed:
  • Liu Shuaicheng

    (College of Business, 12634 Shanghai University of Finance and Economics , No. 777 Guoding Road, Shanghai, China)

Abstract

This paper analyzes the effect of price leadership on collusion among firms with different discount factors. We first find that price leadership relaxes the incentive constraints for collusion. We then derive a dynamic collusion path in which the firms with lower discount factors initially occupy the largest market share and then gradually cede it to the firms with higher discount factors. This collusion path is shaped by the conflicting forces of fairness and efficiency. Additionally, price leadership can restore the efficiency implied by differentiated time preferences in repeated games.

Suggested Citation

  • Liu Shuaicheng, 2024. "Collusive Price Leadership Among Firms with Different Discount Factors," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(2), pages 487-518.
    • Handle: RePEc:bpj:bejtec:v:24:y:2024:i:2:p:487-518:n:1005
    DOI: 10.1515/bejte-2023-0112
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    More about this item

    Keywords

    collusive price leadership; different discount factors; dynamic collusion path;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

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