An Integrated Model of Predation and Collusion

11 Pages Posted: 20 Mar 2004

Abstract

We present a two-firm model of predation under complete information, based on different discount factors, and integrate it with a model of collusion. Competition, collusion and predation are seen as alternative strategies. The basic conclusions are that there is predation when one firm has a high discount factor and the other one has a low discount factor, there is competition when both firms have low discount factors, and, when both firms have high discount factors, equilibria are multiple and the game may become a war of attrition. Collusion can be sustained as a Nash equilibrium in some cases, but the required discount factors are bounded both from below and above.

Keywords: Predation, collusion, competition, war of attrition, nash equilibrium, discount factors

JEL Classification: C72, D43, L13

Suggested Citation

Coloma, German, An Integrated Model of Predation and Collusion. Available at SSRN: https://ssrn.com/abstract=518102 or http://dx.doi.org/10.2139/ssrn.518102

German Coloma (Contact Author)

CEMA University ( email )

Department of Economics
Av. Cordoba 374
Buenos Aires, Capital Federal C1054AAP
Argentina
+54 11 6314-3000 (Phone)
+54 11 4314-1654 (Fax)

HOME PAGE: http://https://ucema.edu.ar/german-coloma

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