Sales and collusion in a market with storage

Francesco Nava and Pasquale Schiraldi ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Sales are a widespread and well-known phenomenon documented in several product markets. This paper presents a novel rationale for sales that does not rely on consumer heterogeneity, or on any form of randomness to explain such periodic price fluctuations. The analysis is carried out in the context of a simple repeated price competition model, and establishes that firms must periodically reduce prices in order to sustain collusion when goods are storable and the market is large. The largest equilibrium profits are characterized at any market size. A trade-off between the size of the industry and its profits arises. Sales foster collusion, by magnifying the inter-temporal links in consumers' decisions.

Keywords: storage; sales; collusion; cartel size; repeated games (search for similar items in EconPapers)
JEL-codes: L11 L12 L13 L41 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-pr~ and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Journal of the European Economic Association, June, 2014, 12(3), pp. 791-832. ISSN: 1542-4766

Downloads: (external link)
http://eprints.lse.ac.uk/55936/ Open access version. (application/pdf)

Related works:
Journal Article: SALES AND COLLUSION IN A MARKET WITH STORAGE (2014)
Working Paper: Sales and collusion in a market with storage (2013)
Working Paper: Sales and Collusion in a Market with Storage (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:55936

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