Partial collusion in an asymmetric duopoly

Posted by D. Daniel Sokol

Marc Escrihuela Villar (Universitat de les Illes Balears) describes Partial collusion in an asymmetric duopoly.

ABSTRACT: In this paper we investigate the connection between cost asymmetries and the sustainability of collusion within the context of a infinitely repeated Cournot duopoly. We assume that firms are able to coordinate on distinct output levels than the unrestricted joint profit maximization outcome. We show that, in our model, regardless of the degree of cost asymmetry, at least some collusion is always sustainable if firms are patient enough. We also endogenize the degree of collusion and show that it has an upper bound determined by the most inefficient firm.