Template-Type: ReDIF-Paper 1.0
Author-Name: Stefano Colombo
Author-X-Name-First: Stefano
Author-X-Name-Last: Colombo
Author-Email: stefano.colombo@unicatt.it
Author-Workplace-Name: DISCE, Università Cattolica



Title: Product differentiation, price discrimination and collusion

Abstract: The existing literature which analyses the relationship between the product differentiation degree and the sustainability of a collusive agreement on price assumes that firms cannot price discriminate, and concludes that there is a negative relationship between the product differentiation degree and the critical discount factor. This paper, in contrast, assumes that firms are able to price discriminate. Within the Hotelling framework, three different collusive schemes are studied: optimal collusion on discriminatory prices; optimal collusion on a uniform price; collusion not to discriminate. We obtain that the critical discount factor of the first and the third collusive scheme does not depend on the product differentiation degree, while the critical discount factor of the second collusive scheme depends positively on the product differentiation degree. Moreover, we show that suboptimal collusion is more difficult to sustain than optimal collusion.
Length: nn pages 36
Creation-Date: 2009-03

File-URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0085.pdf
File-Format: Application/pdf
File-Function: First version, 2009
Number: ief0085
Classification-JEL: D43; L11; L41
Keywords: Horizontal differentiation; Price discrimination; Tacit collusion
Handle: RePEc:ctc:serie3:ief0085