*We would like to thank Bruno Jullien for frequent and valuable advice, Joe Harrington for thoughtful comments, Patrick Rey, Massimo Motta, Gianni DeFraja, for many helpful discussions and Katharine Brewis for her assistance. We are also grateful to the Editor for suggesting significant improvements to the paper and to two anonymous referees for their comments. We finally thank seminar participants at ASSET 2005 Crete, IIOC 2006 Boston and Toulouse University. All remaining errors are our own. The views expressed are those of the author and do not necessarily reflect those of DG Competition or the European Commission.
ALTERNATING MONOPOLY AND TACIT COLLUSION*
Article first published online: 24 MAY 2010
© 2010 The Authors. Journal compilation © 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 58, Issue 2, pages 402–423, June 2010
How to Cite
Amelio, A. and Biancini, S. (2010), ALTERNATING MONOPOLY AND TACIT COLLUSION. The Journal of Industrial Economics, 58: 402–423. doi: 10.1111/j.1467-6451.2010.00412.x
- Issue published online: 24 MAY 2010
- Article first published online: 24 MAY 2010
- alternating monopoly;
- temporal market sharing;
This paper considers the use of the alternating monopoly strategy (AMS) as a (tacit) collusion device. We show that firms may choose this strategy in particular environments, when other collusive strategies are also feasible. In particular, we stress how the presence of an observable move (entry), distinct from the competitive stage (price setting), can serve as a coordination device, reducing monitoring costs in incomplete information environments. The paper thus shows that AMS may be preferable to the classic market sharing strategy (MSS) and in some cases it is the only collusive equilibrium.