Product market segmentation and output collusion within substitute products

Xu Xu and Kalyn Coatney ()

Journal of Economics and Business, 2015, vol. 77, issue C, 15 pages

Abstract: We extend the differentiated product model, first developed by Bowley (1924), by relaxing the assumption that each firm produces only one differentiated product. By doing so, we are able to analyze the potential for collusive market segmentation in a two-stage decision framework, first in product space and second in output. We find that when firms cannot coordinate on output, the required discount factor that supports collusive market segmentation is strictly decreasing in product substitutability and is greater than partial output and full collusion. Overall we find that output collusion alone is easier to sustain than collusive product market segmentation.

Keywords: Collusion; Differentiated products; Market segmentation; Trigger strategies (search for similar items in EconPapers)
JEL-codes: L23 L41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:77:y:2015:i:c:p:1-15

DOI: 10.1016/j.jeconbus.2014.07.002

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