Monday, September 11, 2017
Collusion and welfare in the case of a horizontally differentiated duopoly with network compatibility
Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) studies Collusion and welfare in the case of a horizontally differentiated duopoly with network compatibility.
ABSTRACT: Based on a horizontally differentiated duopoly model with network externalities, in which we focus on the role of compatibility between the products, we consider the effect of collusion on social welfare. We demonstrate that collusion improves social welfare, compared to the case of noncooperative Cournot competition, if the level of compatibility between the products under collusion is sufficiently large, given that a network externality is strong. In this case, the collusion is sustainable.