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Tacit collusion and its welfare effect in a network product market

Tsuyoshi Toshimitsu

Economics Bulletin, 2018, vol. 38, issue 4, 1787-1795

Abstract: Based on a horizontally differentiated duopoly model with network externalities, and focusing on the role of compatibility between products, we demonstrate the conditions under which collusive behavior improves social welfare. In particular, if the degree of a network compatibility effect upgraded by collusive agreement is sufficiently large, collusion increases consumer surplus compared with noncooperative Cournot competition.

Keywords: collusion; network externality; compatibility; horizontally differentiated Cournot duopoly; welfare (search for similar items in EconPapers)
JEL-codes: L1 L2 (search for similar items in EconPapers)
Date: 2018-10-10
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