Tacit collusion in a one-shot game of price competition with soft capacity constraints

• Autores: Marie-Laure Cabon-Dhersin, Nicolas Drouhin
• Localización: Journal of Economics & Management Strategy, ISSN-e 1530-9134, Vol. 23, Nº. 2, 2014, págs. 427-442
• Idioma: inglés
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• Resumen

  • This paper analyzes price competition in the case of two firms operating under constant returns to scale with more than one production factor. Factors are chosen sequentially in a two-stage game generating a soft capacity constraint and implying a convex short-term cost function in the second stage of the game. We show that tacit collusion is the only predictable result of the whole game, that is, the unique payoff-dominant pure strategy Nash equilibrium. Technically, this paper bridges the capacity constraint literature on price competition and that of the convex cost function.