Vertical Differentiation and Collusion: Cannibalization or Proliferation?

Jean Gabszewicz, Marco Marini and Ornella Tarola

No 2016.15, Working Papers from Fondazione Eni Enrico Mattei

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 We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market.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: Vertically Differentiated Markets; Cannibalization; Market Pruning; Price Collusion (search for similar items in EconPapers)
JEL-codes: D42 D43 L1 L12 L13 L41 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-law, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Vertical Differentiation and Collusion: Cannibalization or Proliferation? (2016)
Working Paper: Vertical differentiation and collusion: pruning or proliferation? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2016.15

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