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Collusion when players take turns

Author

Listed:
  • Corchón, Luis C.
  • Correa-Lopera, Guadalupe
  • Moreno, Bernardo

Abstract

Traditional collusion models typically assume that players coordinatetheir actions actively during the competition process to influence the outcomes.In contrast, we consider a repeated interaction setting betweentwo players where collusion occurs through well-defined strategies: theplayers take turns, with one holding monopoly power while the other eitherrefrains from participating or behaves as if absent. We provide afull characterization of when taking turns constitutes a subgame perfectNash equilibrium in repeated games. By allowing players to discount timedifferently, we uncover a novel, non-monotonic condition on the discountfactor that sustains collusion. We apply our findings to three specificcontexts: contests, duopoly, and political competition.

Suggested Citation

  • Corchón, Luis C. & Correa-Lopera, Guadalupe & Moreno, Bernardo, 2025. "Collusion when players take turns," UC3M Working papers. Economics 46355, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:46355
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    Keywords

    Collusion;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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