Tacit Collusion with Consumer Preference Costs

Abstract When consumers have preference costs, two opposing effects need to be assessed analyse the incentives of firms set collusive prices. On one hand, costs make a deviation from collusion less attractive, as deviating firm must offer large enough discount cover costs. other lock in and punishment rivals effective. are low, latter dominates is more challenging sustain than situation with no With high (weakly) dominant strategy. These results do not eventuate model switching