Does cooperation in manufactoring foster tacit collusion

Leslie Neubecker

No 261, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: This paper analyzes the effect of cooperation in manufacturing on firms' inclination to collude in the market. Compared to non-cooperation in manufacturing, coordination of the investments in production yields a higher competitive profit. If firms intensify cooperation and produce in a joint plant, this profit is still higher due to lower investment costs. Since firms return to competition after a defection from the collusive agreement, a high competitive profit implies a weak punishment. Collusion is thus more difficult, the closer firms cooperate in manufacturing. Moreover, given competition or collusion in the market, joint production yields the highest profit and welfare.

Keywords: ): Manufacturing; Cooperative production; Dynamic competition; Collusion (search for similar items in EconPapers)
JEL-codes: C73 L13 L23 L41 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:261

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