Cost structures, technology levels and collusion

Suryaprakash Mishra
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Suryaprakash Mishra: National Law University, Delhi, India

Theoretical and Applied Economics, 2022, vol. XXIX, issue 4(633), Winter, 231-238

Abstract: We analyze the role of technology levels in collusion and welfare in Cournot duopoly set up with a linear demand and quadratic costs. We show that for relatively inefficient technologies, the collusive profit is dominated by the Cournot-Nash profit; thus, the firms with not-so good technologies would not collude. We also show that as technology improves, the collusive profit dominates the Cournot-Nash profit, which creates an incentive for collusion, i.e., innovation would lead to collusion. We also show that, for very good/bad technology, innovation would not be anticonsumers’ welfare, whereas for the intermediate one, it may be.

Keywords: technology; innovation; collusion; Cournot-Nash; profit; welfare; costs. (search for similar items in EconPapers)
Date: 2022
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