Tacit collusion in price-setting oligopoly: a puzzle redux

We study tacit collusion in price-setting duopoly games with strategic complements and substitutes. While this problem has been considered by several studies, this article sheds new light on the comparison by focusing on the relationship between dynamic stability of equilibrium and tacit collusion. We find when controlling for the absolute slope of the reaction functions, there are no robust differences in either the convergence properties or tacit collusion between complements and substitutes treatments. JEL Classification: D43, LI3, L40
1. Introduction This article concerns the determinants of tacit collusion in duopoly markets. While factors such as group size and communication are well-known ingredients for cooperation, a growing body of [...]