Contreras, Roberto Georgantzis, Nikolaos Ginés, Miguel
Year of Publication:
[Journal:] Estudios de Economía [ISSN:] 0718-5286 [Volume:] 35 [Year:] 2008 [Issue:] 1 [Pages:] 19-31
We study cartel stability in a differentiated price-setting duopoly with returns to scale. We show that a cartel may be equally stable in the presence of lower differentiation, provided that the decreasing returns parameter is high. In addition we demonstrate that for a given factor of discount, there are technologies that can have decreasing returns to scale where the cartel always is stable independent of the differentiation degree.
collusion product differentiation decreasing returns to scale