Start
March 24, 2022 - 3:30 pm
End
March 24, 2022 - 4:30 pm
Title : Collusion under Product Differentiation
Co-authors: Dr Neelanjan Sen, Assistant Professor Madras School of Economics and Urvashi Tandon, Madras School of Economics
Abstract:
We study the formation and stability of cartel under vertical and horizontal product differentiation under cost asymmetry. The possibility of stable cartel is lesser for an agreement that allows the lower quality-product to be produced if the relative quality difference (net of cost) increases or the horizontal product di erentiation decreases. In the presence of side-payments, for a cartel agreement that does not allow the lower quality-product to be produced, the possibility of stable cartel falls if the relative quality difference (net of cost) falls of the horizontal product differentiation increases.However, if the firms do not maximize joint-profits and reduce output equally in the absence of side-payments, the possibilities of stable cartel falls if the horizontal product differentiation falls, but it is independent of the relative quality difference net of cost. Welfare sometimes increases after cartel formation if the lower quality good is not produced in the absence of side-payments. A similar impact on welfare is observed if the firms do not maximize joint-profits and reduce output equally in the absence of side-payments.
Moderator : Dr. Ritika Jain