We study a dynamic Cournot model in which the technology exhibits decreasing returns and show that, for any given discount factor, collusion can always be sustained when the number of firms increases if the marginal cost function is sufficiently steep. Under such conditions, we show that the aggregate collusive profits remain bounded away from zero and the ratio of collusive profits to the Cournot profits is always non-trivially greater than one, as the number of firms in the market increases. In addition, as the number of firms in the market increases, collusion becomes systematically more harmful for consumers. Finally, we discuss the implications of our theoretical results for competition policy.

Colombo, L. V. A., Grillo, M., Pignataro, A., Collusion under decreasing returns to scale, <<ECONOMIA E POLITICA INDUSTRIALE>>, 2024; (N/A): N/A-N/A. [doi:10.1007/s40812-024-00338-9] [https://hdl.handle.net/10807/305497]

Collusion under decreasing returns to scale

Colombo, Luca Vittorio Angelo;Grillo, Michele;Pignataro, Aldo
2024

Abstract

We study a dynamic Cournot model in which the technology exhibits decreasing returns and show that, for any given discount factor, collusion can always be sustained when the number of firms increases if the marginal cost function is sufficiently steep. Under such conditions, we show that the aggregate collusive profits remain bounded away from zero and the ratio of collusive profits to the Cournot profits is always non-trivially greater than one, as the number of firms in the market increases. In addition, as the number of firms in the market increases, collusion becomes systematically more harmful for consumers. Finally, we discuss the implications of our theoretical results for competition policy.
2024
Inglese
Colombo, L. V. A., Grillo, M., Pignataro, A., Collusion under decreasing returns to scale, <<ECONOMIA E POLITICA INDUSTRIALE>>, 2024; (N/A): N/A-N/A. [doi:10.1007/s40812-024-00338-9] [https://hdl.handle.net/10807/305497]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/305497
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