Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73913
Authors: 
Capuano, Carlo
Year of Publication: 
2005
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 91.2005
Abstract: 
The purpose of this article is to analyze how the presence of a competitive fringe, composed by price taker firms, can affect the sustainability of collusive equilibria. Our starting point is that there exists a diffused misunderstanding about its strategical role as collusive minus factor. We deny that. In fact, if it is true that in single dominance cases the presence of a competitive fringe significantly reduces the price increasing profitability and the leader market power, when we consider collective dominance cases the deviation profitability and the punishment mechanism become crucial. In this paper after introducing a minimal structural and strategical framework needed for describing this kind of competition, we prove that not only the presence of a competitive fringe is a collusive plus factor, but also that there exists a critical dimension of the fringe such that collusion is a Nash equilibrium of the static game.
Subjects: 
Collusion
Oligopoly
Competitive fringe
Bertrand
Nash
JEL: 
D43
L1
L13
Document Type: 
Working Paper

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