Fighting collusion by permitting price discrimination

Magdalena Helfrich and Fabian Herweg ()

Economics Letters, 2016, vol. 145, issue C, 148-151

Abstract: We investigate the effect of a ban on third-degree price discrimination on the sustainability of collusion. We build a model with two firms that may be able to discriminate between two consumer groups. Two cases are analyzed: (i) Best-response symmetries so that profits in the static Nash equilibrium are higher if price discrimination is allowed. (ii) Best-response asymmetries so that profits in the static Nash equilibrium are lower if price discrimination is allowed. In both price discrimination scenarios, firms’ discount factor has to be higher in order to sustain collusion in grim-trigger strategies than under uniform pricing.

Keywords: Collusion; Duopoly; Grim-trigger strategies; Third-degree price discrimination (search for similar items in EconPapers)
JEL-codes: D43 K21 L13 L41 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Fighting Collusion by Permitting Price Discrimination (2016)
Working Paper: Fighting Collusion by Permitting Price Discrimination (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:145:y:2016:i:c:p:148-151

DOI: 10.1016/j.econlet.2016.05.024

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