Tuesday, July 11, 2017

The scope for collusion under different pricing schemes

Rasch, Alexander and Gössl, Florian examine The scope for collusion under different pricing schemes.

ABSTRACT: We analyze and compare the incentives to collude under different pricing schemes in a differentiated-products market where customers have elastic demand. We show that allowing firms to set two-part tariffs as opposed to linear prices facilitates collusion at maximum prices independent of the degree of differentiation. However, compared to a situation where firms can only set fixed fees that are independent of the quantity purchased, collusion at maximum prices is less sustainable with two-part tariffs. The results have important implications for competition policy where the perspective—static or dynamic—may be crucial.


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