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Collusion and Durability

Author

Listed:
  • Strausz, Roland
  • Sasaki, Dan

Abstract

We develop a model to show that cartels that produce goods with lower durability are easier to sustain implicitly. This observation gen- erates the following results: 1) implicit cartels have an incentive to pro- duce 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

  • Strausz, Roland & Sasaki, Dan, 2008. "Collusion and Durability," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 246, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:246
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    File URL: https://epub.ub.uni-muenchen.de/13306/1/246.pdf
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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

    Keywords

    cartels; collusion; durability;
    All these keywords.

    JEL classification:

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

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