Product Differentiation and Cartel Stability With Costs of Collusion

Abstract

The stability of collusion has been an interesting phenomena and problem, many of the existing literature focused on the analysis of the stability of collusion without collusion cost, while the real economy and a large number of studies have shown that the collusion cost in collusion between enterprises is very large, this paper analyzes the issue of ease of sustaining collusion with collusion cost under different competition intensity with product differentiation, and modifies the past knowledge about that the collusion is easier to maintain under Cournot competition than under Bertrand competition, and demonstrates that if the collusion cost is above some critical value, the reverse is true. This conclusion provides a more comprehensive perspective in the economic analysis for collusion participants and decision makers.