This paper departs from the standard profit-maximizing model of firm behavior by assuming that firms are motivated in part by personal animosity–or respect–towards their competitors. A reciprocal firm responds to unkind behavior of rivals with unkind actions (negative reciprocity), while at the same time, it responds to kind behavior of rivals with kind actions (positive reciprocity). We find t...

Both in the US and in Europe, antitrust authorities prohibit merger not only if the merged entity, in and of itself, is no longer sufficiently controlled by competition. The authorities also intervene if, post merger, the market structure has changed such that "tacit collusion" or "coordinated effects" become disturbingly more likely. It seems that antitrust neglects the fact that, for more tha...

We show that the non-cooperative equilibrium in a two-period duopoly with consumer variety-seeking may be the same as the collusive outcome in an otherwise identical market without variety-seeking. Specifically, our variety-seeking model implies tacit collusion between firms in both periods, and not just in the second period only as in the switching-cost model of Klemperer (1987a, 1987b), which...

The paper makes two related contributions. First, and in contrast with the rich body of literature on collusion with (mainly perfect) substitutes, it derives general results on the sustainability of tacit coordination for a class of nested demand functions that allows for the full range between perfect substitutes and perfect complements. Second, it studies the desirability of joint marketing a...

Electronic commerce (EC) researchers are divided between those who show how EC can cause intense Bertrand competition and those who show an absence of this competition. This research takes a more central stance to show when intense competition occurs and when collusion occurs in an EC environment. We present a multi-industry investigation of competition and collusion related to firm pricing beh...