Tacit collusion in a one-shot game of price competition with soft capacity constraints

Marie-Laure Cabon-Dhersin () and Nicolas Drouhin ()
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Marie-Laure Cabon-Dhersin: CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université

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Abstract: This paper analyses price competition in the case of two firms operating under constant returns to scale with more than one production factor. Factors are chosen sequentially in a two-stage game generating a soft capacity constraint and implying a convex short term cost function in the second stage of the game. We show that tacit collusion is the only predictable result of the whole game i.e. the unique payoff-dominant pure strategy Nash equilibrium. Technically, this paper bridges the capacity constraint literature on price competition and that of the convex cost function.

Keywords: price competition; tacit collusion; convex cost; Bertrand Paradox; capacity constraint (search for similar items in EconPapers)
Date: 2012-06-12
Note: View the original document on HAL open archive server: https://hal.science/hal-00709093v2
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Related works:
Journal Article: Tacit Collusion in a One‐Shot Game of Price Competition with Soft Capacity Constraints (2014)
Working Paper: Tacit Collusion in a One-Shot Game of Price Competition with Soft Capacity Constraints (2014)
Working Paper: Tacit Collusion in a One-Shot Game of Price Competition with Soft Capacity Constraints (2014)
Working Paper: Tacit collusion in a one-shot game of price competition with soft capacity constraints (2012)
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