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Networks of Collaboration in Oligopoly

Author

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  • Sumit Joshi

    (George Washington University)

Abstract
In an oligopoly, prior to choosing quantities/prices, each firm has an opportunity to form pair-wise collaborative links with other firms. These pair-wise links lower costs of production of the firms which form a link. The collection of pair-wise links defines a collaboration network. We study stable and efficient networks under different types of market competition. We find that except under extreme competition, a la Bertrand, firms have an incentive to collaborate wit their competitors to lower costs of production. We find that two simple architectures, the complete network, where every firm has a collaboration link with every other firm, and the network with a dominant group, which contains a large number of completely connected firms and several isolated firms, are stable under different market conditions. We also observe that stable networks are often efficient from a social point of view.

Suggested Citation

  • Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
    • Handle: RePEc:ecm:wc2000:0623
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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