Alternating Monopoly and Tacit Collusion

22 Pages Posted: 4 Jun 2010

See all articles by Andrea Amelio

Andrea Amelio

European Union - Directorate General for Competition

Sara Biancini

University of Cergy-Pontoise - THEMA

Abstract

This paper considers the use of the alternating monopoly strategy (AMS) as a (tacit) collusion device. We show that firms may choose this strategy in particular environments, when other collusive strategies are also feasible. In particular, we stress how the presence of an observable move (entry), distinct from the competitive stage (price setting), can serve as a coordination device, reducing monitoring costs in incomplete information environments. The paper thus shows that AMS may be preferable to the classic market sharing strategy (MSS) and in some cases it is the only collusive equilibrium.

Suggested Citation

Amelio, Andrea and Biancini, Sara, Alternating Monopoly and Tacit Collusion. The Journal of Industrial Economics, Vol. 58, Issue 2, pp. 402-423, June 2010, Available at SSRN: https://ssrn.com/abstract=1615798 or http://dx.doi.org/10.1111/j.1467-6451.2010.00412.x

Andrea Amelio

European Union - Directorate General for Competition ( email )

Place Madou, Madouplein 1
Saint-Josse-ten-Noode/Sint-Joost-ten-Noode
Brussels, B-1049
Belgium

Sara Biancini

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

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