Finance and collusion in oligopolistic markets

Sugata Marjit, Arijit Mukherjee, Xinpeng Xu and Lei Yang

The North American Journal of Economics and Finance, 2025, vol. 76, issue C

Abstract: We explore how financial constraints affect the sustainability of product market collusion in a bank-financed oligopoly, where firms operate within an imperfect credit market. Our analysis uncovers a non-monotonic relationship between the sustainability of collusion and the level of financial constraints, using a general demand function. Notably, collusion tends to be more sustainable when firms experience low to moderate financial constraints, as opposed to having no financial constraints at all. However, when firms are under complete financial constraints, the sustainability of collusion may decrease compared to situations without financial constraints. These findings hold true for both Cournot and Bertrand competition models in the product market.

Keywords: Debt Finance, Financial Constraint; Collusion; Cournot; Bertrand (search for similar items in EconPapers)
JEL-codes: D21 D43 G21 L12 L41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:76:y:2025:i:c:s1062940824002766

DOI: 10.1016/j.najef.2024.102351

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