Competition, Tacit Collusion and Free Entry

W. Bentley Macleod, George Norman () and Jacques Thisse

Economic Journal, 1987, vol. 97, issue 385, 189-98

Abstract: Few oligopoly models address the problem of tacit collusion when there is the possibility of entry. One model that does so is the well-known Loschian model of spatial competition. The purpose of this paper is to present a reexamination of this model within the context of game theory. The authors model the process leading to industry equilibrium with collusive behavior as a two-stage process. The first stage determines a free-entry equilibrium using Bertrand-Nash assumptions, while the second stage deals with the collusive selection of price. This solution is shown to be a subgame perfect Nash equilibrium. At equilibrium, firms make long-run excess profits even in the presence of free entry. Copyright 1987 by Royal Economic Society.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://links.jstor.org/sici?sici=0013-0133%2819870 ... 0.CO%3B2-C&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Competition, tacit collusion and free entry (1987)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:97:y:1987:i:385:p:189-98

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().