Collusive market sharing with spatial competition
Kai Andree () and
Mike Schwan ()
No 105, Volkswirtschaftliche Diskussionsbeiträge from Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät
This paper develops a spatial model to analyze the stability of a market sharing agreement between two firms. We find that the stability of the cartel depends on the relative market size of each firm. Collusion is not attractive for firms with a small home market, but the incentive for collusion increases when the firm’s home market is getting larger relative to the home market of the competitor. The highest stability of a cartel and additionally the highest social welfare is found when regions are symmetric. Further we can show that a monetary transfer can stabilize the market sharing agreement.
New Economics Papers: this item is included in nep-bec, nep-com, nep-geo, nep-ind and nep-mic
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Journal Article: Collusive Market Sharing with Spatial Competition (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pot:vwldis:105
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