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Colluding on excluding

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  • Argenton, Cédric

Abstract

In an oligopoly characterized by barriers to (re-)entry, a finite horizon, complete information, convex costs, and the presence of three identical firms, I show that in subgame-perfect equilibrium two of them (the predators) can choose to charge an initial price that is so low that the third (the prey) decides to exit immediately. In this predatory pricing equilibrium, the predators can enjoy higher profits than in the best collusive equilibrium with three firms. Thus, a coalition of two firms can benefit from colluding on excluding.

Suggested Citation

  • Argenton, Cédric, 2019. "Colluding on excluding," European Economic Review, Elsevier, vol. 113(C), pages 194-206.
    • Handle: RePEc:eee:eecrev:v:113:y:2019:i:c:p:194-206
    DOI: 10.1016/j.euroecorev.2019.01.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Cartels; Collusion; Predatory pricing; Bertrand competition; Anticompetitive practice;
    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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