Pricing Policy and Partial Collusion

Posted by D. Daniel Sokol

Stefano Colombo (DISCE, Università Cattolica) addresses Pricing Policy and Partial Collusion.

ABSTRACT: We study the pricing policy equilibria emerging in a partial collusion duopolistic framework where firms in the first stage of the game choose non-cooperatively whether to price discriminate or not, and from the second stage onward collude on prices.When the discount factor is particularly high or particularly low both firms price discriminate in equilibrium. For intermediate discount factors and high firms'asymmetry, the unique equilibrium is characterized by only the smaller firm choosing price discrimination.In the case of intermediate discount factors and low firms' asymmetry, there are two possible equilibria: both firms price discriminate or no firm price discriminates.