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Exogenous Product Differentiation and the Stability of Collusion

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  • L. Lambertini

Abstract

The stability of collusion in quantities in a differentiated duopoly is analised, and the result is compared to that emerging in the case of price-setting behaviour. It turns out that quantity collusion is generally better sustained than price collusion, unless products are almost perfect substitutes. Under both quantity and price competition, the social damage associated with collusion is increasing in the degree of substitutability.

Suggested Citation

  • L. Lambertini, 1995. "Exogenous Product Differentiation and the Stability of Collusion," Working Papers 219, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:219
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    References listed on IDEAS

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    1. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    2. Ross, Thomas W., 1992. "Cartel stability and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 1-13, March.
    3. Majerus, David W., 1988. "Price vs. quantity competition in oligopoly supergames," Economics Letters, Elsevier, vol. 27(3), pages 293-297.
    4. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
    5. Hackner, Jonas, 1994. "Collusive pricing in markets for vertically differentiated products," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 155-177, June.
    6. Rothschild, R., 1992. "On the sustainability of collusion in differentiated duopolies," Economics Letters, Elsevier, vol. 40(1), pages 33-37, September.
    7. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
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