Collusion in Quality-Segmented Markets

Iwan Bos and Marco Marini

No 307986, 2030 Agenda from Fondazione Eni Enrico Mattei (FEEM)

Abstract: This paper analyzes price collusion in a repeated game with two submarkets; a standard and a premium quality segment. Within this setting, we study four types of price-fixing agreement: (i) a segment-wide cartel in the premium submarket only, (ii) a segment-wide cartel in the standard submarket only, (iii) two segment-wide cartels, and (iv) an industry-wide cartel. We present a complete characterization of the collusive pricing equilibrium and examine the corresponding effect on market shares and welfare. Partial cartels operating in a sufficiently large segment lose market share and the industry-wide cartel prefers to maintain market shares at pre-collusive levels. The impact on consumer and social welfare critically depends on the cost of producing quality. Moreover, given that there is a cartel, more collusion can be beneficial for society as a whole.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 36
Date: 2020-12-16
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
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Downloads: (external link)
https://ageconsearch.umn.edu/record/307986/files/NDL2020-020.pdf (application/pdf)

Related works:
Journal Article: Collusion in quality‐segmented markets (2022)
Working Paper: Collusion in Quality-Segmented Markets (2020)
Working Paper: Collusion in Quality-Segmented Markets (2020)
Working Paper: Collusion in Quality-Segmented Markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemgc:307986

DOI: 10.22004/ag.econ.307986

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