Sales and collusion in a market with storage

Nava, Francesco and Schiraldi, Pasquale ORCID: 0000-0003-2469-1734 (2014) Sales and collusion in a market with storage. Journal of the European Economic Association, 12 (3). pp. 791-832. ISSN 1542-4766

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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-off between the size of the industry and its profits arises. Sales foster collusion, by magnifying the inter-temporal links in consumers' decisions.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/journal/10.1111/%28...
Additional Information:	© 2014 European Economic Association
Divisions:	Economics STICERD
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce
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
Date Deposited:	28 Feb 2014 16:04
Last Modified:	06 Jan 2024 22:18
URI:	http://eprints.lse.ac.uk/id/eprint/55936

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