Asymmetric Collusion with Growing Demand

• Type: Article in International Scientific Journal
• Date: 2013

Authors

António Brandão (Author) FEP; Joana Pinho (Author) FEP; Helder Vasconcelos (Author) FEP

Journal

Title: Journal of Industry, Competition and Trade

Vol. 14 No. 1

Pages: 429-472

ISSN: 1566-1679

Publisher: Springer Nature

Indexing

Scopus - 6 Citations

Other information

Authenticus ID: P-00G-3C2

DOI: 10.1007/s10842-013-0171-z

Abstract (EN): We characterize collusion sustainability in markets where demand growth triggers the entry of a new firm whose efficiency may be different from the efficiency of the incumbents. We find that the profit-sharing rule that firms adopt to divide the cartel profit after entry is a key determinant of the incentives for collusion (before and after entry). In particular, if the incumbents and the entrant are very asymmetric, collusion without side-payments cannot be sustained. However, if firms divide joint profits through bargaining and are sufficiently patient, collusion is sustainable even if firms are very asymmetric. © 2013, Springer Science+Business Media New York.

Language: English

Type (Professor's evaluation): Scientific