The Neglected Effects of Demand Characteristics on the Sustainability of Collusion

Andrea Gallice ()

ICER Working Papers from ICER - International Centre for Economic Research

Abstract: According to traditional IO models, the characteristics of market demand (intercept, slope, elasticity) and of technology (level of symmetric marginal costs) do not play any role in defining the sustainability of collusive behaviors in Bertrand oligopolies. The paper modifies this counterintuitive result by showing that all the above mentioned factors do a¤ect the sustainability of collusion when prices are assumed to be discrete rather than continuous. The sign of these effects is unambiguous. Their magnitude varies greatly: in some cases it is totally negligible, in others it becomes extremely relevant.

Keywords: collusion; market demand; Bertrand supergames. (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com
Date: 2008-06
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Working Paper: The Neglected Effects of Demand Characteristics on the Sustainability of Collusion (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:icr:wpicer:03-2008

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