Collusion when players take turns

Luis C. Corchón, Guadalupe Correa-Lopera and Bernardo Moreno

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Traditional collusion models typically assume that players coordinatetheir actions actively during the competition process to influence the outcomes.In contrast, we consider a repeated interaction setting betweentwo players where collusion occurs through well-defined strategies: theplayers take turns, with one holding monopoly power while the other eitherrefrains from participating or behaves as if absent. We provide afull characterization of when taking turns constitutes a subgame perfectNash equilibrium in repeated games. By allowing players to discount timedifferently, we uncover a novel, non-monotonic condition on the discountfactor that sustains collusion. We apply our findings to three specificcontexts: contests, duopoly, and political competition.

Keywords: Collusion; Political; competition; Repeated; games; Subgame; perfect; Nash; equilibrium; Take-turns (search for similar items in EconPapers)
JEL-codes: C62 C73 D43 D72 (search for similar items in EconPapers)
Date: 2025-03-25
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:46355

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