Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, January 9, 2009

Sustaining Collusion in Growing Markets

Posted by D. Daniel Sokol

Helder Vasconcelos
(Universidade Católica Portuguesa - Economics) provides some thoughts on Sustaining Collusion in Growing Markets.

ABSTRACT: The impact of demand growth on the collusion possibilities is investigated in a Cournot supergame where market growth may trigger future entry and the collusive agreement is enforced by the most profitable grim trigger strategies available. It is shown that even in situations where perfect collusion can be sustained after entry, coping with a potential entrant in a market which is growing over time may completely undermine any pre-entry collusive plans of the incumbent firms. This is because, before entry, a deviation and the following punishment phase may become more attractive thanks to their additional effect in terms of delaying entry.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/01/sustaining-coll.html

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