Collusion under product differentiation

Neelanjan Sen, Urvashi Tandon () and Rajit Biswas ()
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Urvashi Tandon: Madras School of Economics
Rajit Biswas: Centre For Development Studies

Journal of Economics, 2024, vol. 142, issue 1, No 1, 43 pages

Abstract: Abstract The present model analyses the possibility of stable cartels under vertical and horizontal product differentiation in the presence of cost asymmetry. This possibility is lesser for an agreement that allows the lower quality product to be produced when the quality difference (net of cost) increases or the level of horizontal product differentiation decreases. However, if side payments are allowed, and the cartel agreement does not allow the lower quality product to be produced, the result changes. In this second situation, the possibility of a stable cartel falls if the quality difference (net of cost) falls or the horizontal product differentiation increases. Welfare may increase after cartel formation if the lower quality good is not produced in the presence of side payments.

Keywords: Cartel stability; Horizontal and vertical product differentiation; Cournot competition; Welfare (search for similar items in EconPapers)
JEL-codes: D24 L13 L24 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:142:y:2024:i:1:d:10.1007_s00712-023-00852-9

DOI: 10.1007/s00712-023-00852-9

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