The Analysis About Vertical Differentiation, Cost Structure and the Stability of Collusion

Abstract

In order to analyze collusion stability in real economy under different cost structure, the fixed cost structure and variable cost structure is assumed under vertical differentiation and different competitive types (Cournot competition and Bertrand competition). By comparing the different competitive equilibrium, firm competes with each other under different cost structure and competitive types, which influences the stability of collusion in different ways. Under fixed cost and changeable cost structure, the high-quality firm is always more difficult to maintain collusion than the low-quality firm in vertical differentiation. With the increase of, the quality difference will get smaller and smaller, the high-quality becomes more and more difficult to maintain collusion. In equilibrium, price competition is fiercer, firms aim to release price competition under Bertrand competition, and so the quality difference will be bigger.