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Imperfect collusion in an asymmetric duopoly

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  • Marc Escrihuela-Villar
  • Carlos Gutiérrez-Hita

Abstract

Using the coefficient of cooperation, we analyse the effect of cost asymmetries on collusive agreements when firms are able to coordinate on distinct output levels than the unrestricted joint profit maximization outcome. In this context, we first investigate the extent to which collusive agreements are feasible. Secondly, we focus on collusion sustainability in an infinitely repeated game. We show that, regardless of the degree of cost asymmetry, at least some collusion is always sustainable. Finally, the degree of collusion is also endogeneised to show that cooperation has an upper bound determined by the most inefficient firm.

Suggested Citation

  • Marc Escrihuela-Villar & Carlos Gutiérrez-Hita, 2018. "Imperfect collusion in an asymmetric duopoly," Estudios de Economia, University of Chile, Department of Economics, vol. 45(1 Year 20), pages 29-50, June.
    • Handle: RePEc:udc:esteco:v:45:y:2018:i:1:p:29-50
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    References listed on IDEAS

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    More about this item

    Keywords

    Imperfect collusion; cost asymmetries; sustainability;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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