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The neglected effects of demand characteristics on the sustainability of collusion

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  • Gallice, Andrea

Abstract

According to standard IO models, the parameters that characterize market demand (intercept, slope, and elasticity) and technology (the level of symmetric marginal costs) do not play any role in defining the sustainability of collusive behaviors in Bertrand oligopolies. This paper modifies this counterintuitive result by showing that all of the aforementioned factors do indeed matter when prices are assumed to be discrete rather than continuous. The sign of these effects is clear. Their magnitude varies greatly; i.e., in some cases, it is totally negligible, while in others, it becomes extremely relevant.

Suggested Citation

  • Gallice, Andrea, 2010. "The neglected effects of demand characteristics on the sustainability of collusion," Research in Economics, Elsevier, vol. 64(4), pages 240-246, December.
    • Handle: RePEc:eee:reecon:v:64:y:2010:i:4:p:240-246
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    Cited by:

    1. Zimmerman, Paul R., 2010. "On the sustainability of collusion in Bertrand supergames with discrete pricing and nonlinear demand," MPRA Paper 20249, University Library of Munich, Germany.

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    More about this item

    Keywords

    Collusion Market demand Discrete prices Bertrand supergames;

    JEL classification:

    • 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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