Tacit Collusion with Consumer Preference Costs

Guillem Roig

No 18190, Documentos de Trabajo from Universidad del Rosario

Abstract: When consumers have preference costs, two opposing effects need to be assessed to analyze firms' incentives to set collusive prices. On the one hand, preference costs make a deviation from collusion less attractive, as the deviating firm must offer a steeper discount to cover these preference costs. On the other hand, preference costs lock in consumers and make punishment from rivals less effective. When preference costs are low, the second effect dominates and collusion is harder to sustain than in a situation with no preference costs. The contrary happens with high enough preference costs.

Keywords: Tacit Collusion; Consumer Preference Costs (search for similar items in EconPapers)
JEL-codes: D43 L12 L13 (search for similar items in EconPapers)
Pages: 10
Date: 2020-06-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
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Journal Article: Tacit Collusion with Consumer Preference Costs (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:018190

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