Vertical Differentiation and Collusion: Cannibalization or Proliferation?

Jean Gabszewicz, Marco Marini and Ornella Tarola

No 232221, ETA: Economic Theory and Applications from Fondazione Eni Enrico Mattei (FEEM)

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 We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market.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. The same findings do not hold when firms are horizontally differentiated along a circle.

Keywords: Public; Economics (search for similar items in EconPapers)
Pages: 22
Date: 2016-03-01
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Vertical Differentiation and Collusion: Cannibalization or Proliferation? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemth:232221

DOI: 10.22004/ag.econ.232221

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