Tacit Collusion in Price-Setting Oligopoly: A Puzzle Redux.

We study tacit collusion in price-setting duopoly games with strategic complements and substitutes. While this problem has been considered by several studies, this article sheds new light on the comparison by focusing on the relationship between dynamic stability of equilibrium and tacit collusion....

Full description

Bibliographic Details
Published in:	Southern Economic Journal Vol. 79; no. 3; pp. 703 - 727
Main Authors:	Essen, Matt Van, Hankins, William B.
Format:	Article
Published:	Wiley-Blackwell Jan2013
Subjects:	Oligopolies Economic equilibrium Economic competition Collusion Pricing Algorithms
Online Access:	View this record in EBSCOhost

Description
Summary:	We study tacit collusion in price-setting duopoly games with strategic complements and substitutes. While this problem has been considered by several studies, this article sheds new light on the comparison by focusing on the relationship between dynamic stability of equilibrium and tacit collusion. We find when controlling for the absolute slope of the reaction functions, there are no robust differences in either the convergence properties or tacit collusion between complements and substitutes treatments.