Collusion under decreasing returns to scale

Luca Vittorio Angelo Colombo, Michele Grillo, Aldo Pignataro

Risultato della ricerca: Contributo in rivistaArticolo in rivista

Abstract

We study a dynamic Cournot model in which the technology exhibits decreasing returns and show that, for any given discount factor, collusion can always be sustained when the number of firms increases if the marginal cost function is sufficiently steep. Under such conditions, we show that the aggregate collusive profits remain bounded away from zero and the ratio of collusive profits to the Cournot profits is always non-trivially greater than one, as the number of firms in the market increases. In addition, as the number of firms in the market increases, collusion becomes systematically more harmful for consumers. Finally, we discuss the implications of our theoretical results for competition policy.
Lingua originaleEnglish
pagine (da-a)N/A-N/A
RivistaEconomia e Politica Industriale
DOI
Stato di pubblicazionePubblicato - 2024

Keywords

  • Collusion
  • Industry structure
  • Competition policy

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