Collusive Market Structure Under Learning-By-Doing and Increasing Returns

Dilip Mookherjee and Debraj Ray

The Review of Economic Studies, 1991, vol. 58, issue 5, 993-1009

Abstract: Learning-by-doing and increasing returns are often perceived to have similar implications for market structure and conduct. We analyse this in the context of an infinite-horizon price-setting game. Learning is shown to not reduce the viability of market-sharing collusion between a given number of firms, whereas intra-period increasing returns invariably does. We subsequently develop a model where the number of active firms is determined endogenously, under the assumption that the post-entry game is collusive. In this model, learning has no effect on concentration, while scale economies increase concentration.

Date: 1991
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