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Vertical differentiation and collusion: Pruning or proliferation?

Jean Gabszewicz (), Marco Marini () and Ornella Tarola ()

Research in Economics, 2017, vol. 71, issue 1, 129-139

Abstract: In this paper, we tackle the dilemma of pruning versus proliferation in a vertically differentiated oligopoly under the assumption that some firms collude and control both the range of variants for sale and their corresponding prices, likewise a multiproduct firm. We analyse whether pruning emerges and, if so, a fighting brand is marketed. We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market. Under pruning, these firms commercialize a fighting brand only when facing competitors in a low-end market.

Keywords: Vertically differentiated markets; Cannibalization; Market pruning; Price collusion (search for similar items in EconPapers)
Date: 2017
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Working Paper: Vertical differentiation and collusion: pruning or proliferation? (2017)
Working Paper: Vertical differentiation and collusion: pruning or proliferation? (2016) Downloads
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DOI: 10.1016/j.rie.2016.10.003

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