Network Externalities and Downstream Collusion under Asymmetric Costs: A Note

This paper considers the collusive stability of downstream competition in a vertical market with network externalities and cost asymmetry. A dynamic collusion game is constructed, backward induction employed to solve subgame perfect Nash equilibrium. We show that larger lead less incentive for an inefficient firm, while efficient this depends on efficiency gap. An increase will destabilize when asymmetry large are relatively weak.