Colluding on excluding

Cédric Argenton

European Economic Review, 2019, vol. 113, issue C, 194-206

Abstract: In an oligopoly characterized by barriers to (re-)entry, a finite horizon, complete information, convex costs, and the presence of three identical firms, I show that in subgame-perfect equilibrium two of them (the predators) can choose to charge an initial price that is so low that the third (the prey) decides to exit immediately. In this predatory pricing equilibrium, the predators can enjoy higher profits than in the best collusive equilibrium with three firms. Thus, a coalition of two firms can benefit from colluding on excluding.

Keywords: Cartels; Collusion; Predatory pricing; Bertrand competition; Anticompetitive practice (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:113:y:2019:i:c:p:194-206

DOI: 10.1016/j.euroecorev.2019.01.006

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