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- Title
When Does Predation Dominate Collusion?
- Authors
Wiseman, Thomas
- Abstract
I study repeated competition among oligopolists. The only novelty is that firms may go bankrupt and permanently exit: the probability that a firm survives a price war depends on its financial strength, which varies stochastically over time. Under some conditions including no entry, an anti-folk theorem holds: when firms are patient, so that strength levels change relatively quickly, every Nash equilibrium involves an immediate price war that lasts until at most one firm remains. Surprisingly, the possibility of entry may facilitate collusion, as may impatience. The model can explain some observed patterns of collusion and predation.
- Subjects
COLLUSION; BANKRUPTCY; PRICE wars; STOCHASTIC analysis; NASH equilibrium
- Publication
Econometrica, 2017, Vol 85, Issue 2, p555
- ISSN
0012-9682
- Publication type
Article
- DOI
10.3982/ECTA13121