AUTHOR: Rupayan Pal and Marcella Scrimitore
TITLE: Tacit Collusion and Market Concentration under Network Effects
In an infinitely repeated Cournot game with trigger strategy punishment, we demonstrate that the relationship between market concentration and collusion sustainability depends on the strength of network externalities. The latter is shown to interact with the number of firms and to affect the profitability of cooperation vs. competition, which delivers the result, challenging conventional wisdom, that lower market concentration can make collusion more stable.
Keywords : Collusion, market concentration, network effects
JEL Code: L13, L14, L41