Munich Personal RePEc Archive

Vertical differentiation and collusion: pruning or proliferation?

Jean Gabszewicz, Jean and Marini, Marco A. and Tarola, Ornella (2016): Vertical differentiation and collusion: pruning or proliferation? Forthcoming in: Research in Economics , Vol. 71, No. 1, 2017 (1 March 2017)

[img]
Preview
PDF
MPRA_paper_74599.pdf

Download (482kB) | Preview

Abstract

In this paper, we tackle the dilemma of pruning versus proliferation in a vertically differentiated oligopoly under the assumption that some firms collude and control both the range of variants for sale and their corresponding prices, likewise a multi-product firm. We analyse whether pruning emerges and, if so, a fighting brand is marketed. We find that it is always more profitable for colluding firms to adopt a pricing strategy such that some variants are withdrawn from the market. Under pruning, these firms commercialize a fighting brand only when facing competitors in a low-end market.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.