We study the impact of space on perfect collusion sustainability within the unidirectional Hotelling model where the firms are constrained to move to the left. We obtain that when the firm located to the left of the Hotelling segment has the greater incentive to deviate, the distance between the firms has a negative impact on the capability of firms to sustain collusion in equilibrium. On the other hand, when the firm located to the right has the greater incentive to deviate, greater spatial distance makes collusion easier to sustain in equilibrium. These results substantially differ from the bidirectional Hotelling model.
Colombo, S., Cartels in the unidirectional Hotelling model, <<ECONOMIC MODELLING>>, 2013; (Marzo): 690-696. [doi:10.1016/j.econmod.2013.01.028] [http://hdl.handle.net/10807/40082]
Cartels in the unidirectional Hotelling model
Colombo, Stefano
2013
Abstract
We study the impact of space on perfect collusion sustainability within the unidirectional Hotelling model where the firms are constrained to move to the left. We obtain that when the firm located to the left of the Hotelling segment has the greater incentive to deviate, the distance between the firms has a negative impact on the capability of firms to sustain collusion in equilibrium. On the other hand, when the firm located to the right has the greater incentive to deviate, greater spatial distance makes collusion easier to sustain in equilibrium. These results substantially differ from the bidirectional Hotelling model.
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