Spatial pricing and collusion

John Heywood, Dongyang Li and Guangliang Ye

Metroeconomica, 2021, vol. 72, issue 2, 425-440

Abstract: The stability of collusion is compared assuming quadratic transport costs under two spatial pricing schemes, uniform mill pricing and spatial price discrimination. This comparison uniquely allows fully endogenous location choice and examines when two firms collude, when two of three firms collude and when three firms collude. Spatial price discrimination facilitates collusion more than uniform pricing in the first two of the three examinations but not in the third. This heterogeneity argues that the presence of price discrimination by itself does not inform antitrust authorities about the likelihood of collusion.

Date: 2021
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