The paper models competition among firms which operate at excess capacity as a non-cooperative bargaining game. It is shown that, provided sunk costs are sufficiently high, collusion among firms will ensue. This result has been employed to provide a non traditional interpretation of both price and non-price competition in the European car market in recent years
Grillo, M., Cossutta, D., Excess Capacity, Sunk Costs and Collusion: A Non-Cooperative Bargaining Game, <<INTERNATIONAL JOURNAL OF INDUSTRIAL ORGANIZATION>>, 1986; (4): 251-270 [http://hdl.handle.net/10807/27125]
Excess Capacity, Sunk Costs and Collusion: A Non-Cooperative Bargaining Game
Grillo, Michele;
1986
Abstract
The paper models competition among firms which operate at excess capacity as a non-cooperative bargaining game. It is shown that, provided sunk costs are sufficiently high, collusion among firms will ensue. This result has been employed to provide a non traditional interpretation of both price and non-price competition in the European car market in recent years
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