Collusion in Differentiated Duopolies with Quadratic Costs
Bulletin of Economic Research, 2006, vol. 58, issue 2, 151-159
The analysis of collusion in infinitely repeated duopoly games has generally assumed that marginal cost is constant, but this note uses quadratic costs (linear marginal costs) to compare the sustainability of collusion under Bertrand and Cournot duopoly with differentiated products. It is shown that when marginal costs are sufficiently increasing in output, then it is always easier to sustain collusion under Cournot duopoly than under Bertrand duopoly for any degree of product substitutability. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2006.
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