Asymmetric collusion with growing demand

António Brandão, Joana Pinho*, Hélder Vasconcelos

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)


We characterize collusion sustainability in markets where demand growth triggers the entry of a new firm whose efficiency may be different from the efficiency of the incumbents. We find that the profit-sharing rule that firms adopt to divide the cartel profit after entry is a key determinant of the incentives for collusion (before and after entry). In particular, if the incumbents and the entrant are very asymmetric, collusion without side-payments cannot be sustained. However, if firms divide joint profits through bargaining and are sufficiently patient, collusion is sustainable even if firms are very asymmetric.
Original languageEnglish
Pages (from-to)429-472
Number of pages44
JournalJournal of Industry, Competition and Trade
Publication statusPublished - 2013
Externally publishedYes


  • Collusion
  • Growing demand
  • Nash bargaining
  • Profit-sharing


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