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Collusion and Durability

Author

Listed:
  • Dan Sasaki

    (University of Tokyo, Institute of Social Science)

  • Roland Strausz

    (Free University of Berlin, Department of Economics)

Abstract

We make the observation that cartels which produce goods with lower durability are easier to sustain implicitly. This observation generates the following results: 1) implicit cartels have an incentive to produce goods with an inefficiently low level of durability; 2) a monopoly or explicit cartel is welfare superior to an implicit cartel; 3) welfare is non--monotonic in the number of firms; 4) a regulator may demand inefficiently high levels of durability to prevent collusion.

Suggested Citation

  • Dan Sasaki & Roland Strausz, 2007. "Collusion and Durability," Papers 032, Departmental Working Papers.
    • Handle: RePEc:bef:lsbest:032
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    References listed on IDEAS

    as
    1. Faruk Gul, 1987. "Noncooperative Collusion in Durable Goods Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 248-254, Summer.
    2. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
    3. Peter L. Swan, 1970. "Market Structure and Technological Progress: The Influence of Monopoly on Product Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(4), pages 627-638.
    4. Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 729-749.
    5. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    6. Schmalensee, Richard, 1979. "Market Structure, Durability, and Quality: A Selective Survey," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 177-196, April.
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    Cited by:

    1. Oliver Gürtler, 2008. "Implicit contracting with a (potentially) reliable agent," Journal of Economics, Springer, vol. 94(2), pages 177-189, July.

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    More about this item

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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