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Sales and collusion in a market with storage

Nava, Francesco and Schiraldi, Pasquale (2013) Sales and collusion in a market with storage. . The London School of Economics and Political Science, London, UK.

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Abstract

Sales are a widespread and well-known phenomenon documented in several product markets. This paper presents a novel rationale for sales that does not rely on consumer heterogeneity, or on any form of randomness to explain such periodic price fluctuations. The analysis is carried out in the context of a simple repeated price competition model, and establishes that firms must periodically reduce prices in order to sustain collusion when goods are storable and the market is large. The largest equilibrium profits are characterized at any market size. A trade-o¤ between the size of the industry and its profits arises. Sales foster collusion, by magnifying the intertemporal links in consumers' decisions.

Item Type: Monograph (Working Paper)
Additional Information: © 2013 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L12 - Monopoly; Monopolization Strategies
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
L - Industrial Organization > L4 - Antitrust Issues and Policies > L41 - Monopolization; Horizontal Anticompetitive Practices
Sets: Departments > Economics
Date Deposited: 11 Nov 2013 12:14
Last Modified: 20 Jun 2019 23:26
URI: http://eprints.lse.ac.uk/id/eprint/54249

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