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Credible Collusion in Spatially Separated Markets*
Author(s) -
Gross John,
Holahan William L.
Publication year - 2003
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00071
Subject(s) - forbearance , collusion , economics , microeconomics , range (aeronautics) , bertrand competition , value (mathematics) , stability (learning theory) , repeated game , cournot competition , monetary economics , game theory , computer science , oligopoly , finance , mathematics , aerospace engineering , statistics , engineering , machine learning
In an infinitely repeated game, sellers employ a trigger strategy of mutual forbearance from invasion of each other's markets, stabilized against invasion by the threat of Bertrand pricing. Contrary to conventional static models, this article shows stability for a wide range of transportation costs and present value parameters, and that increases in transportation costs tend to destabilize the collusive agreement.