Welfare-enhancing collusion in the presence of a competitive fringe
Following the structure of many commodity markets, we consider a reduced number of large firms and a competitive fringe of many small suppliers choosing quantities in an infinitehorizon setting subject to demand shocks. We show that a collusive agreement among the large firms may not only bring an o...
| 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/1721.1/45041 |
| _version_ | 1810982776868962304 |
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| author | Montero, Juan-Pablo Guzmán, Juan Ignacio |
| 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. Montero, Juan-Pablo Guzmán, Juan Ignacio |
| author_sort | Montero, Juan-Pablo |
| collection | MIT |
| description | Following the structure of many commodity markets, we consider a reduced number of large firms and a competitive fringe of many small suppliers choosing quantities in an infinitehorizon setting subject to demand shocks. We show that a collusive agreement among the large firms may not only bring an output contraction but also an output expansion (relative to the non-collusive output level). The latter occurs during booms, when the fringe's market share is more important, and is due to the strategic substitutability of quantities (we will never observe an output expanding collusion in a price setting game). In addition and depending on the fringe's market share the time at which collusion is most difficult to sustain can be either at booms or recessions. |
| first_indexed | 2024-09-23T10:36:01Z |
| format | Working Paper |
| id | mit-1721.1/45041 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T10:36:01Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/450412019-04-10T14:52:16Z Welfare-enhancing collusion in the presence of a competitive fringe Montero, Juan-Pablo Guzmán, Juan Ignacio Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Following the structure of many commodity markets, we consider a reduced number of large firms and a competitive fringe of many small suppliers choosing quantities in an infinitehorizon setting subject to demand shocks. We show that a collusive agreement among the large firms may not only bring an output contraction but also an output expansion (relative to the non-collusive output level). The latter occurs during booms, when the fringe's market share is more important, and is due to the strategic substitutability of quantities (we will never observe an output expanding collusion in a price setting game). In addition and depending on the fringe's market share the time at which collusion is most difficult to sustain can be either at booms or recessions. 2009-04-03T17:06:52Z 2009-04-03T17:06:52Z 2005 Working Paper 2005-011 http://hdl.handle.net/1721.1/45041 61710562 MIT-CEEPR (Series) ; 05-011WP. 21, [2] p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Montero, Juan-Pablo Guzmán, Juan Ignacio Welfare-enhancing collusion in the presence of a competitive fringe |
| title | Welfare-enhancing collusion in the presence of a competitive fringe |
| title_full | Welfare-enhancing collusion in the presence of a competitive fringe |
| title_fullStr | Welfare-enhancing collusion in the presence of a competitive fringe |
| title_full_unstemmed | Welfare-enhancing collusion in the presence of a competitive fringe |
| title_short | Welfare-enhancing collusion in the presence of a competitive fringe |
| title_sort | welfare enhancing collusion in the presence of a competitive fringe |
| url | http://hdl.handle.net/1721.1/45041 |
| work_keys_str_mv | AT monterojuanpablo welfareenhancingcollusioninthepresenceofacompetitivefringe AT guzmanjuanignacio welfareenhancingcollusioninthepresenceofacompetitivefringe |