Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142289
Authors: 
Gabszewicz, Jean J.
Marini, Marco A.
Tarola, Ornella
Year of Publication: 
2016
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 15.2016
Abstract: 
In this paper, we tackle the dilemma of pruning versus proliferation in a vertically differentiated oligopoly under the assumption that some firms collude and control both the range of variants for sale and their corresponding prices, likewise a multiproduct firm. We analyse whether pruning emerges and, if so, a fighting brand is marketed. We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market. Under pruning, these firms commercialize a fighting brand only when facing competitors in a low-end market. The same findings do not hold when firms are horizontally differentiated along a circle.
Subjects: 
Vertically Differentiated Markets
Cannibalization
Market Pruning
Price Collusion
JEL: 
D42
D43
L1
L12
L13
L41
Document Type: 
Working Paper

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