Impossibility of market division with two-sided private information about production costs

Joao Correia-da-Silva

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: In a market with several independent cities, two firms with private information about their production costs decide whether to open a store in each city or restrict their activity to some cities. In cities where a single rm opens a store, this firm is a monopolist. In cities where both firms open stores, there is price competition with full revelation of private information. In equilibrium, both firms open stores in all the cities. Tacit collusion to divide the market is impeded because, by restraining from opening additional stores, a firm reveals its inefficiency, which triggers an attack from its rival.

Keywords: Collusion; Market division; Two-sided private information; Adverse selection; Compromise game. (search for similar items in EconPapers)
JEL-codes: C72 D82 L41 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2013-04
New Economics Papers: this item is included in nep-bec, nep-com and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.fep.up.pt/investigacao/workingpapers/wp490.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.fep.up.pt/investigacao/workingpapers/wp490.pdf [302 Found]--> https://fep.up.pt/investigacao/workingpapers/wp490.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:por:fepwps:490

Access Statistics for this paper

More papers in FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto Contact information at EDIRC.
Bibliographic data for series maintained by ().