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22 Inperfect Competition 3

22 Inperfect Competition 3 - Topic 9 Competition between...

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4/9/2009 1 Topic 9: Competition between firms (3) USC Marshall Collusion, entry and other considerations Introduction Some further issues: – Firms are engaged in repeated interactions – Firms can enter and exit industries – Firms make many other choices in addition to capacity/pricing USC Marshall – Welfare and antitrust legislation Collusion Collusion: – When interacting only once, the firms could not achieve an equilibrium that would have maximized their joint profits because each firm has incentives to deviate from that outcome and increase their individual profits USC Marshall – Can repeated interaction help? • Yes, as long as the firms don’t discount the future too much
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