Abstract

http://ssrn.com/abstract=1501010
 
 

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Tacit Collusion with Price-Matching Punishments


Yuanzhu Lu


affiliation not provided to SSRN

Julian Wright


National University of Singapore (NUS) - Department of Economics

September 1, 2009

International Journal of Industrial Organization, Forthcoming

Abstract:     
Tacit collusion is explored under a strategy in which, loosely speaking, firms match the lowest price set by any firm in the previous period. Conditions are provided under which this strategy supports collusive outcomes in a subgame perfect equilibrium. In contrast to traditional results, the highest collusive price is always lower than the monopoly price. It corresponds to the unique Nash equilibrium price when upward and downward price deviations are matched. Our paper provides a game theoretic interpretation of the old kinked demand curve theory which unlike earlier attempts does not depart from standard timing assumptions to do so.

Keywords: Collusion, intertemporal reaction functions, kinked demand curve

JEL Classification: L11, L12, L13, L41

Accepted Paper Series





Not Available For Download

Date posted: November 8, 2009  

Suggested Citation

Lu, Yuanzhu and Wright, Julian, Tacit Collusion with Price-Matching Punishments (September 1, 2009). International Journal of Industrial Organization, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1501010

Contact Information

Yuanzhu Lu
affiliation not provided to SSRN ( email )
Julian Wright (Contact Author)
National University of Singapore (NUS) - Department of Economics ( email )
AS2 Level 6, 1 Arts Link
Singapore 117570
Singapore
6568743941 (Phone)
6567752646 (Fax)
HOME PAGE: http://profile.nus.edu.sg/fass/ecsjkdw/
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