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Collusion in Differentiated Duopolies with Quadratic Costs
Author(s) -
Collie David R.
Publication year - 2006
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.0307-3378.2006.00235.x
Subject(s) - duopoly , cournot competition , collusion , marginal cost , economics , microeconomics , bertrand competition , product differentiation , constant (computer programming) , mathematical economics , oligopoly , computer science , programming language
Abstract The analysis of collusion in infinitely repeated duopoly games has generally assumed that marginal cost is constant, but this note uses quadratic costs (linear marginal costs) to compare the sustainability of collusion under Bertrand and Cournot duopoly with differentiated products. It is shown that when marginal costs are sufficiently increasing in output, then it is always easier to sustain collusion under Cournot duopoly than under Bertrand duopoly for any degree of product substitutability.