Collusive Price Leadership Among Firms with Different Discount Factors

Liu Shuaicheng ()
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Liu Shuaicheng: College of Business, 12634 Shanghai University of Finance and Economics , No. 777 Guoding Road, Shanghai, China

The B.E. Journal of Theoretical Economics, 2024, vol. 24, issue 2, 487-518

Abstract: This paper analyzes the effect of price leadership on collusion among firms with different discount factors. We first find that price leadership relaxes the incentive constraints for collusion. We then derive a dynamic collusion path in which the firms with lower discount factors initially occupy the largest market share and then gradually cede it to the firms with higher discount factors. This collusion path is shaped by the conflicting forces of fairness and efficiency. Additionally, price leadership can restore the efficiency implied by differentiated time preferences in repeated games.

Keywords: collusive price leadership; different discount factors; dynamic collusion path (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/bejte-2023-0112

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