Cartel Stability under Quality Differentiation
Theoretical Economics
2018-12-27 v1
Abstract
This note considers cartel stability when the cartelized products are vertically differentiated. If market shares are maintained at pre-collusive levels, then the firm with the lowest competitive price-cost margin has the strongest incentive to deviate from the collusive agreement. The lowest-quality supplier has the tightest incentive constraint when the difference in unit production costs is sufficiently small.
Keywords
Cite
@article{arxiv.1812.10293,
title = {Cartel Stability under Quality Differentiation},
author = {Iwan Bos and Marco Marini},
journal= {arXiv preprint arXiv:1812.10293},
year = {2018}
}
Comments
17 pages, including 3 additional Appendices