Collusion in Quality-Segmented Markets

Iwan Bos and Marco Marini

No 22/20, Working Papers from Sapienza University of Rome, DISS

Abstract: This paper analyzes price collusion in a repeated game with two submarkets; a standard and a premium quality segment. Within this setting, we study four types of price-?xing agreement: (i) a segment-wide cartel in the premium submarket only, (ii) a segment-wide cartel in the standard submarket only, (iii) two segment-wide cartels, and (iv) an industry-wide cartel. We present a complete characterization of the collusive pricing equilibrium and examine the corresponding e¤ect on market shares and welfare. Partial cartels operating in a su¢ ciently large segment lose market share and the industry-wide cartel prefers to maintain market shares at pre-collusive levels. The impact on consumer and social welfare critically depends on the cost of producing quality. Moreover, given that there is a cartel, more collusion can be bene?cial for society as a whole.

Keywords: Partial Cartels; Price Collusion; Market Segmentation; Vertical Di¤erentiation. (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
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Related works:
Journal Article: Collusion in quality‐segmented markets (2022)
Working Paper: Collusion in Quality-Segmented Markets (2020)
Working Paper: Collusion in Quality-Segmented Markets (2020)
Working Paper: Collusion in Quality-Segmented Markets (2020)
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