Disadvantageous semicollusion

Chaim Fershtman, Neil Gandal*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Standard analysis in industrial organization indicates that firms earn higher profits if they collude rather than compete on prices (or quantities). However, firms choose other strategic variables, such as investment in capacity or R & D, in addition to choosing prices or production levels. Thus the overall evaluation of product market collusion must take into account its effect on the interaction in the other dimensions. This paper demonstrates that collusion in the product market may yield lower overall profits because it intensifies competition in the other dimensions of the interaction.

Original languageEnglish
Pages (from-to)141-154
Number of pages14
JournalInternational Journal of Industrial Organization
Issue number2
StatePublished - Jun 1994


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