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In this paper we provide game theoretic support for the results of the kinked demand curve. By analyzing an infinitely repeated game where unit costs fluctuate stochastically between a low and a high state over time and where firms follow a price-matching punishment strategy, we demonstrate that...
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; this is equivalent to modeling firms as an implicit cartel playing a punishment game. We show that coordination can …
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increases impose a cost during cartel formation as the price leader initially loses sales. We show that for intermediate … cartel executes two consecutive price increases, the choice between using the same leader or alternating leadership depends …
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; this is equivalent to modeling firms as an implicit cartel playing a punishment game. We show that coordination can …
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