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Tacit collusion and its welfare effect in a network product market

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  • Tsuyoshi Toshimitsu

    (Kwansei Gakuin University)

Abstract

Based on a horizontally differentiated duopoly model with network externalities, and focusing on the role of compatibility between products, we demonstrate the conditions under which collusive behavior improves social welfare. In particular, if the degree of a network compatibility effect upgraded by collusive agreement is sufficiently large, collusion increases consumer surplus compared with noncooperative Cournot competition.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2018. "Tacit collusion and its welfare effect in a network product market," Economics Bulletin, AccessEcon, vol. 38(4), pages 1787-1795.
    • Handle: RePEc:ebl:ecbull:eb-18-00435
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    References listed on IDEAS

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    Cited by:

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    2. Jen-Yao Lee & Chen-Chia Fan & Chien-Shu Tsai, 2023. "Network Externalities and Downstream Collusion under Asymmetric Costs: A Note," Games, MDPI, vol. 14(2), pages 1-11, March.

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    More about this item

    Keywords

    collusion; network externality; compatibility; horizontally differentiated Cournot duopoly; welfare;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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