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dc.contributor.authorAndersson, Olaen_US
dc.contributor.authorWengström, Eriken_US
dc.description.abstractThis paper extends the concept of weak renegotiation-proof equilibrium (WRP) to allow for costly renegotiation and shows that even small renegotiation costs can have dramatic effects on the set of equilibria. More specifically, the paper analyzes the infinitely repeated Bertrand game. It is shown that for every level of renegotiation cost there exists a discount factor such that any collusive profit can be supported as an equilibrium outcome. Hence, any arbitrary small renegotiation cost will suffice to facilitate collusive outcomes for sufficiently patient firms. This result stands in stark contrast to the unique pure-strategy WRP equilibrium without renegotiation costs, which implies marginal-cost pricing in every period. Moreover, in comparison to the findings of McCutcheon (1997), who states that renegotiation costs have to be substantial to facilitate collusion, this result points to a quite different conclusion.en_US
dc.publisher|aEkonomiska Forskningsinst. |cStockholmen_US
dc.relation.ispartofseries|aSSE/EFI Working Paper Series in Economics and Finance |x725en_US
dc.subject.keywordNoncooperative game theoryen_US
dc.subject.keywordWeak Renegotiation-proofnessen_US
dc.subject.keywordCostly Renegotationen_US
dc.subject.keywordRepeated Bertrand gamesen_US
dc.subject.stwNichtkooperatives Spielen_US
dc.subject.stwWiederholte Spieleen_US
dc.subject.stwUnvollkommener Markten_US
dc.titleCostly renegotiation in repeated Bertrand gamesen_US
dc.typeWorking Paperen_US

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