An Integrated Model of Predation and Collusion

We present a two-firm model of predation under complete information, based on different discount factors, and integrate it with a model of collusion. Competition, collusion and predation are seen as alternative strategies. The basic conclusions are that there is predation when one firm has a high discount factor and the other one has a low discount factor, there is competition when both firms have low discount factors, and, when both firms have high discount factors, equilibria are multiple and the game may become a war of attrition. Collusion can be sustained as a Nash equilibrium in some cases, but the required discount factors are bounded both from below and above