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On the profitability of collusion in location games

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  • Huck, Steffen
  • Knoblauch, Vicki
  • Muller, Wieland

Abstract

In this note we take a first step towards the analysis of collusion in markets with spatial competition, focusing on the case of pure location choices. We find that collusion can only be profitable if a coalition contains more than half of all players. This result holds for location games played in k-dimensional Euclidean space as long as consumers are distributed via atomless density functions. For competition on the unit interval, unit circle, and unit square we also derive sufficient conditions for collusion to be profitable.
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  • Huck, Steffen & Knoblauch, Vicki & Muller, Wieland, 2003. "On the profitability of collusion in location games," Journal of Urban Economics, Elsevier, vol. 54(3), pages 499-510, November.
    • Handle: RePEc:eee:juecon:v:54:y:2003:i:3:p:499-510
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    1. Omer Ben-Porat & Moshe Tennenholtz, 2019. "Multiunit Facility Location Games," Mathematics of Operations Research, INFORMS, vol. 44(3), pages 865-889, August.
    2. Dimitrios Xefteris & Nicholas Ziros, 2014. "A Spatial Model of Perfect Competition," University of Cyprus Working Papers in Economics 05-2014, University of Cyprus Department of Economics.
    3. Daniel Strobach, 2006. "Competition between airports with an application to the state of Baden-Württemberg," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 272/2006, Department of Economics, University of Hohenheim, Germany.

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