Munich Personal RePEc Archive

Cartel Stability under Quality Differentiation

Bos, Iwan and Marini, Marco A. (2018): Cartel Stability under Quality Differentiation.

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Abstract

This note considers cartel stability when the cartelized products are vertically differentiated. If market shares are maintained at pre-collusive levels, then the firm with the lowest competitive price-cost margin has the strongest incentive to deviate from the collusive agreement. The lowest-quality supplier has the tightest incentive constraint when the difference in unit production costs is sufficiently small.

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