Strategic profit sharing leads to collusion in Bertrand oligopolies

José Luis Ferreira () and Roberts Waddle

Open Access publications from Universidad Carlos III de Madrid from Universidad Carlos III de Madrid

Abstract: One simple way to endogenize the degree of cross ownership in an industry is that rms give away part of their pro ts. We show that this possibility of unilaterally giving pro ts away to the rival previous to Bertrand competition opens the door to multiple equilibria. In the symmetric duopoly with con- stant marginal costs any price between the cost and the monopolistic price can be sustained in a subgame perfect equilibrium. Thus, tacit collusion in the one shot game can be achieved. Further, any market share can also be sustained for any equilibrium price. These results are extended to more than two rms and to asymmetric costs.

Keywords: Profit sharing; Oligopoly; Collusion; Cross ownership; Bertrand (search for similar items in EconPapers)
JEL-codes: L12 (search for similar items in EconPapers)
References: View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://e-archivo.uc3m.es/bitstream/10016/9795/1/we1036.pdf (application/pdf)

Related works:
Working Paper: Strategic profit sharing leads to collusion in Bertrand oligopolies (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ner:carlos:info:hdl:10016/9795

Access Statistics for this paper

More papers in Open Access publications from Universidad Carlos III de Madrid from Universidad Carlos III de Madrid
Series data maintained by Contact person ().