Asymmetric collusion with growing demand

Antonio Brandao, Joana Pinho and Helder Vasconcelos

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

Abstract: We characterize collusion sustainability in markets where demand growth may trigger the entry of a new firm whose efficiency may be different from the efficiency of the incumbents. We find that the profit-sharing rule that firms adopt to divide the cartel profit after entry is a key determinant of the incentives for collusion (before and after entry). In particular, if the incumbents and the entrant are very asymmetric, collusion without side- payments cannot be sustained. However, if firms divide joint profits through bargaining and are sufficiently patient, collusion is sustainable even if firms are very asymmetric.

Keywords: Collusion; Growing demand; Nash bargaining; Profit-sharing. (search for similar items in EconPapers)
JEL-codes: K21 L11 L13 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2013-10
New Economics Papers: this item is included in nep-com and nep-law
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Asymmetric Collusion with Growing Demand (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:510

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