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Collusion under different pricing schemes
Author(s) -
Gössl Florian,
Rasch Alexander
Publication year - 2020
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12392
Subject(s) - collusion , microeconomics , economics , competition policy , product differentiation , competition (biology) , price discrimination , nonlinear pricing , set (abstract data type) , contrast (vision) , industrial organization , product (mathematics) , econometrics , monopoly , computer science , mathematics , ecology , geometry , artificial intelligence , cournot competition , programming language , biology
Abstract We analyze collusive outcomes under different pricing schemes in a differentiated product market in which customers have elastic demand. Starting with a situation in which firms can set two‐part tariffs to price discriminate, we consider two policy interventions that ban price discrimination: Firms must set (a) linear prices or (b) fixed fees. We find that collusion at maximum prices becomes harder to sustain under linear prices. By contrast, the analysis shows that the fixed fees policy facilitates collusion at maximum prices. The results have important implications for competition policy.