Costly Collusion in Differentiated Industries

Raphael Thomadsen () and Ki-Eun Rhee ()
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Raphael Thomadsen: UCLA Anderson, 110 Westwood Plaza, Suite B411, Los Angeles, California 90095
Ki-Eun Rhee: KDI School of Public Policy, 207-43 Cheongnyangri-dong, Dongdaemun-gu, Seoul, Korea 103-868

Marketing Science, 2007, vol. 26, issue 5, 660-665

Abstract: This paper demonstrates that increased product differentiation will make it more difficult to sustain collusion when it is costly to coordinate or maintain collusion. This result holds for a wide range of models, including all those commonly used to model competition between differentiated products. This contrasts with the previous theoretical literature, which shows that, in the absence of these costs, greater differentiation can help foster collusion under some common models of product differentiation but is consistent with the empirical literature, which suggests that collusion tends to occur most among homogeneous firms.

Keywords: game theory; product differentiation; competition; collusion (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:26:y:2007:i:5:p:660-665

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