Collusion in quality‐segmented markets

This paper analyzes price collusion in a repeated game with two submarkets: standard and premium quality segment. Within this setting, we study four types of price-fixing agreement: (i) segment-wide cartel the submarket only, (ii) (iii) cartels, (iv) an industry-wide cartel. We present complete characterization collusive pricing equilibrium examine corresponding effect on market shares welfare. Partial cartels operating sufficiently large segment lose share prefers to maintain at precollusive levels. The impact consumer social welfare critically depends cost producing quality. Moreover, given that there is cartel, more can be beneficial for society as whole.