Abuse of Competitive Fringe

Carlo Capuano

No 2005.91, Working Papers from Fondazione Eni Enrico Mattei

Abstract: The purpose of this article is to analyze how the presence of a competitive fringe, composed by price taker firms, can affect the sustainability of collusive equilibria. Our starting point is that there exists a diffused misunderstanding about its strategical role as collusive minus factor. We deny that. In fact, if it is true that in single dominance cases the presence of a competitive fringe significantly reduces the price increasing profitability and the leader market power, when we consider collective dominance cases the deviation profitability and the punishment mechanism become crucial. In this paper after introducing a minimal structural and strategical framework needed for describing this kind of competition, we prove that not only the presence of a competitive fringe is a collusive plus factor, but also that there exists a critical dimension of the fringe such that collusion is a Nash equilibrium of the static game.

Keywords: Collusion; Oligopoly; Competitive fringe; Bertrand; Nash (search for similar items in EconPapers)
JEL-codes: D43 L1 L13 (search for similar items in EconPapers)
Date: 2005-07
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://feem-media.s3.eu-central-1.amazonaws.com/w ... oads/NDL2005-091.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2005.91

Access Statistics for this paper

More papers in Working Papers from Fondazione Eni Enrico Mattei Contact information at EDIRC.
Bibliographic data for series maintained by Alberto Prina Cerai ( this e-mail address is bad, please contact ).