Forward trading and collusion in oligopoly
We consider an infinitely-repeated oligopoly in which at each period firms not only serve the spot market by either competing in prices or quantities but also have the opportunity to trade forward contracts. Contrary to the pro-competitive results of finite-horizon models, we find that the possibili...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Working Paper |
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MIT Center for Energy and Environmental Policy Research
2009
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| Online Access: | http://hdl.handle.net/1721.1/45036 |
| _version_ | 1826206733750501376 |
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| author | Liski, Matti Montero, Juan-Pablo |
| author2 | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. |
| author_facet | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Liski, Matti Montero, Juan-Pablo |
| author_sort | Liski, Matti |
| collection | MIT |
| description | We consider an infinitely-repeated oligopoly in which at each period firms not only serve the spot market by either competing in prices or quantities but also have the opportunity to trade forward contracts. Contrary to the pro-competitive results of finite-horizon models, we find that the possibility of forward trading allows firms to sustain collusive profits that otherwise would not be possible. The result holds both for price and quantity competition and follows because (collusive) contracting of future sales is more effective in deterring deviations from the collusive plan than in inducing the previously identified pro-competitive effects. |
| first_indexed | 2024-09-23T13:37:24Z |
| format | Working Paper |
| id | mit-1721.1/45036 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T13:37:24Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/450362019-04-12T09:55:48Z Forward trading and collusion in oligopoly Liski, Matti Montero, Juan-Pablo Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. We consider an infinitely-repeated oligopoly in which at each period firms not only serve the spot market by either competing in prices or quantities but also have the opportunity to trade forward contracts. Contrary to the pro-competitive results of finite-horizon models, we find that the possibility of forward trading allows firms to sustain collusive profits that otherwise would not be possible. The result holds both for price and quantity competition and follows because (collusive) contracting of future sales is more effective in deterring deviations from the collusive plan than in inducing the previously identified pro-competitive effects. 2009-04-03T17:06:42Z 2009-04-03T17:06:42Z 2005 Working Paper 2005-006 http://hdl.handle.net/1721.1/45036 61197007 MIT-CEEPR (Series) ; 05-006WP. 22 p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Liski, Matti Montero, Juan-Pablo Forward trading and collusion in oligopoly |
| title | Forward trading and collusion in oligopoly |
| title_full | Forward trading and collusion in oligopoly |
| title_fullStr | Forward trading and collusion in oligopoly |
| title_full_unstemmed | Forward trading and collusion in oligopoly |
| title_short | Forward trading and collusion in oligopoly |
| title_sort | forward trading and collusion in oligopoly |
| url | http://hdl.handle.net/1721.1/45036 |
| work_keys_str_mv | AT liskimatti forwardtradingandcollusioninoligopoly AT monterojuanpablo forwardtradingandcollusioninoligopoly |