[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cep/stieip/16.html
   My bibliography  Save this paper

Product Differentiation, Uncertainty and the Stability of Collusion

Author

Listed:
  • Michael A. Raith
Abstract
The conventional view that product heterogeneity limits the scope for collusion among oligolpolists has been challenged in recent theoretical work. This paper provides an argument in support of the conventional view by emphasising the role of uncertainty. I introduce the idea that, with stochastic demand, an increase in the heterogeneity of products also leads to a decrease in the correlation of the firms? demand shocks. With imperfect monitoring, this makes collusion more difficult to sustain, as discriminating between random demand shocks and marginal deviations from the cartel strategy becomes more difficult. These effects are illustrated within a Hotelling-type duopoly model.

Suggested Citation

  • Michael A. Raith, 1996. "Product Differentiation, Uncertainty and the Stability of Collusion," STICERD - Economics of Industry Papers 16, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:16
    as

    Download full text from publisher

    File URL: https://sticerd.lse.ac.uk/dps/ei/ei16.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. K. Sudhir & Pradeep K. Chintagunta & Vrinda Kadiyali, 2005. "Time-Varying Competition," Marketing Science, INFORMS, vol. 24(1), pages 96-109, September.
    2. Paul Prisecaru, 2013. "Microeconomic Analysis In Competition Policy," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 1(2), pages 50-61, November.
    3. Timo Klein & Bertram Neurohr, 2023. "Should Private Exchanges of List Price Information Be Presumed to Be Anticompetitive?," Journal of Industry, Competition and Trade, Springer, vol. 23(1), pages 33-57, June.
    4. Thomas Bourveau & Guoman She & Alminas Žaldokas, 2020. "Corporate Disclosure as a Tacit Coordination Mechanism: Evidence from Cartel Enforcement Regulations," Journal of Accounting Research, Wiley Blackwell, vol. 58(2), pages 295-332, May.
    5. Marcel Canoy & Patrick Rey & Eric van Damme, 2004. "Dominance and Monopolization," Chapters, in: Manfred Neumann & Jürgen Weigand (ed.), The International Handbook of Competition, chapter 7, Edward Elgar Publishing.
    6. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Miklós-Thal, Jeanine, 2008. "Delivered pricing and the impact of spatial differentiation on cartel stability," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1365-1380, November.
    8. O’Connor, Jason & Wilson, Nathan E., 2021. "Reduced demand uncertainty and the sustainability of collusion: How AI could affect competition," Information Economics and Policy, Elsevier, vol. 54(C).
    9. Jeanine Thal, 2006. "Delivered Pricing and the Effect of Horizontal Differentiation on Optimal Collusion," Working Papers 2006-22, Center for Research in Economics and Statistics.
    10. Carter, Colin A. & Chalfant, James A. & Yavapolkul, Navin & Carroll, Christine L., 2016. "International commodity trade, transport costs, and product differentiation," Journal of Commodity Markets, Elsevier, vol. 1(1), pages 65-76.
    11. Ari Hyytinen & Frode Steen & Otto Toivanen, 2019. "An Anatomy of Cartel Contracts," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2155-2191.
    12. Symeonidis, George, 1999. "Cartel stability in advertising-intensive and R&D-intensive industries," Economics Letters, Elsevier, vol. 62(1), pages 121-129, January.
    13. Chiraz Karamti & Lukasz Grzybowski, 2010. "Hedonic study on mobile telephony market in France: pricing–quality strategies," Netnomics, Springer, vol. 11(3), pages 255-289, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:stieip:16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://sticerd.lse.ac.uk/_new/publications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.