 Collusion and leadershipIgor Mouraviev () and Patrick Rey International Journal of Industrial Organization, 2011, vol. 29, issue 6, 705-717 Abstract: The paper explores the role of price or quantity leadership in facilitating collusion. It extends the standard analysis of tacit collusion by allowing firms to make their strategic choices either simultaneously or sequentially. It is shown that price leadership indeed facilitates collusion by making it easier to punish deviations by the leader. In case of pure Bertrand competition, price leadership restores the scope for (perfect) collusion in markets where collusion would not be sustainable otherwise. When firms face asymmetric costs or offer differentiated products, price leadership can also enhance the profitability of collusion—in case of asymmetric costs, the less efficient firm must act as the leader. Finally, such leadership is less effective in case of Cournot competition since, following an aggressive deviation by the leader, the follower would rather limit its own output, making it more difficult to punish the deviation. Still, quantity leadership may enhance collusion when it is already somewhat effective in a simultaneous move setting. Keywords: Collusion; Price leadership (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:6:p:705-717 DOI: 10.1016/j.ijindorg.2011.03.005 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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