Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314668 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11629
Publisher: 
CESifo GmbH, Munich
Abstract: 
We study the propensity of independent algorithms to collude in repeated Cournot duopoly games. Specifically, we investigate the predictive power of different oligopoly and bargaining solutions regarding the effect of asymmetry between firms. We find that both consumers and firms can benefit from asymmetry. Algorithms produce more competitive outcomes when firms are symmetric, but less when they are very asymmetric. Although the static Nash equilibrium underestimates the effect on total quantity and overestimates the effect on profits, it delivers surprisingly accurate predictions in terms of total welfare. The best description of our results is provided by the equal relative gains solution. In particular, we find algorithms to agree on profits that are on or close to the Pareto frontier for all degrees of asymmetry. Our results suggest that the common belief that symmetric industries are more prone to collusion may no longer hold when algorithms increasingly drive managerial decisions.
Subjects: 
algorithmic collusion
Cournot duopoly
asymmetric firms
JEL: 
C73
D43
L13
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.