IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v120y2013i2p259-261.html
   My bibliography  Save this article

Competition and collusion with fixed output

Author

Listed:
  • Zenger, Hans

Abstract

In many industries, output is fixed by exogenous constraints, so firms compete by allocating a given stock of supplies between different markets. This paper shows that collusion in such industries leads firms to shift output from high-margin markets to low-margin markets. As a result, welfare is generally reduced although prices decrease in some markets and increase in others.

Suggested Citation

  • Zenger, Hans, 2013. "Competition and collusion with fixed output," Economics Letters, Elsevier, vol. 120(2), pages 259-261.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:259-261
    DOI: 10.1016/j.econlet.2013.04.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176513002140
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2013.04.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jean-Pierre Benoit & Vijay Krishna, 1987. "Dynamic Duopoly: Prices and Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 23-35.
    2. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    3. Davidson, Carl & Deneckere, Raymond J, 1990. "Excess Capacity and Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 521-541, August.
    4. Péter Eső & Volker Nocke & Lucy White, 2010. "Competition for scarce resources," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 524-548, September.
    5. Ian Gale & Daniel P. O'Brien, 2013. "The Welfare Effects of Use-or-Lose Provisions in Markets with Dominant Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 175-193, February.
    6. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Péter Eső & Volker Nocke & Lucy White, 2010. "Competition for scarce resources," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 524-548, September.
    2. Martimort, David & Pouyet, Jérôme, 2020. "Downstream mergers in vertically related markets with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    3. Raymond J. Deneckere & Dan Kovenock, 1992. "Price Leadership," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 143-162.
      • Raymond Deneckere & Dan Kovenock, 1988. "Price Leadership," Discussion Papers 773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    4. Spagnolo, Giancarlo, 2005. "Managerial incentives and collusive behavior," European Economic Review, Elsevier, vol. 49(6), pages 1501-1523, August.
    5. Yongyang Cai & Yongyang Cai & Kenneth L. Judd, 2017. "Computing Equilibria of Dynamic Games," Operations Research, INFORMS, vol. 65(2), pages 337-356, April.
    6. Vives, Xavier & Jun, Byoung, 2001. "Incentives in Dynamic Duopoly," CEPR Discussion Papers 2899, C.E.P.R. Discussion Papers.
    7. Baldelli, Serena & Lambertini, Luca, 2006. "Price vs quantity in a duopoly supergame with Nash punishments," Research in Economics, Elsevier, vol. 60(3), pages 121-130, September.
    8. Knittel, Christopher R. & Lepore, Jason J., 2010. "Tacit collusion in the presence of cyclical demand and endogenous capacity levels," International Journal of Industrial Organization, Elsevier, vol. 28(2), pages 131-144, March.
    9. Bergman, Mats A., 1998. "Endogenous Timing of Investments Yields Modified Stackelberg Outcomes," SSE/EFI Working Paper Series in Economics and Finance 272, Stockholm School of Economics.
    10. Harstad, Bård & Lancia, Francesco & Russo, Alessia, 2022. "Prices vs. quantities for self-enforcing agreements," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    11. Farm, Ante, 2009. "Market Sharing and Price Leadership," Working Paper Series 3/2009, Stockholm University, Swedish Institute for Social Research.
    12. David K. Levine & Andrea Mattozzi & Salvatore Modica, 2021. "Trade Associations: Why Not Cartels?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 47-64, February.
    13. John Rust & Sungjin Cho, 2018. "Optimal Dynamic Hotel Pricing," 2018 Meeting Papers 179, Society for Economic Dynamics.
    14. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
    15. Sherif Nasser & Danko Turcic, 2016. "To Commit or Not to Commit: Revisiting Quantity vs. Price Competition in a Differentiated Industry," Management Science, INFORMS, vol. 62(6), pages 1719-1733, June.
    16. Kangsik Choi & DongJoon Lee, 2020. "Do firms choose overcapacity or undercapacity in a vertical structure?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 839-847, July.
    17. Boccard, N. & Wauthy, X.Y., 2010. "Equilibrium vertical differentiation in a Bertrand model with capacity precommitment," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 288-297, May.
    18. Matthias Hunold & Kai Hüschelrath & Ulrich Laitenberger & Johannes Muthers, 2020. "Competition, Collusion, and Spatial Sales Patterns: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 737-779, December.
    19. Anderson, E.J. & Cau, T.D.H., 2011. "Implicit collusion and individual market power in electricity markets," European Journal of Operational Research, Elsevier, vol. 211(2), pages 403-414, June.
    20. Aniruddha Bagchi & Arijit Mukherjee, 2011. "Commitment and excess capacity with licensing: an old debate with a new look," Journal of Economics, Springer, vol. 103(2), pages 133-147, June.

    More about this item

    Keywords

    Collusion; Fixed output; Price discrimination;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:259-261. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.