The Comparative Statics of Collusion Models

55 Pages Posted: 23 Aug 2006

See all articles by Kai-Uwe Kuhn

Kai-Uwe Kuhn

Centre for Economic Policy Research (CEPR); University of East Anglia (UEA) - Centre for Competition Policy

Michael S. Rimler

Xavier University - Williams College of Business Administration - Department of Economics and Human Resources

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Date Written: July 2006

Abstract

We develop and illustrate a methodology for obtaining robust comparative statics results for collusion models in markets with differentiated goods by analyzing the homogeneous goods limit of these models. This analysis reveals that the impact of parameter changes on the incentives to deviate from collusion and the punishment profits are often of different order of magnitude yielding comparative statics results that are robust to the functional form of the demand system. We demonstrate with numerical calculations that these limiting results predict the global comparative statics at any degree of product differentiation. We use this methodology to demonstrate the non-robustness of Nash reversion equilibria and to develop new results in the comparative statics of collusion.

Keywords: collusion, robustness, comparative statics, differentiated products, cross-ownership

JEL Classification: D43, L13, L41

Suggested Citation

Kuhn, Kai-Uwe and Kuhn, Kai-Uwe and Rimler, Michael S., The Comparative Statics of Collusion Models (July 2006). CEPR Discussion Paper No. 5742, Available at SSRN: https://ssrn.com/abstract=926106

Kai-Uwe Kuhn (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of East Anglia (UEA) - Centre for Competition Policy ( email )

UEA
Norwich Research Park
Norwich, Norfolk NR47TJ
United Kingdom

Michael S. Rimler

Xavier University - Williams College of Business Administration - Department of Economics and Human Resources ( email )

3800 Victory Parkway
Cincinnati, OH 45207
United States

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