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Cartel stability under quality differentiation

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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. (C) 2018 Elsevier B.V. All rights reserved.

    Research areas

  • Cartel stability, Collusion, Vertical differentiation, PRICE-COMPETITION
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Original languageEnglish
Article number174
Pages (from-to)70-73
Number of pages4
JournalEconomics Letters
Publication statusPublished - Jan 2019