We consider an infinitely-repeated Bertrand game, in which prices are perfectly observed and each firm receives a privately-observed, i.i.d. cost shock in each period. Productive efficiency is possible only if high-cost firms are willing to relinquish market share. In the most profitable...

In the presence of network externalities, we compare the stability of collusion under Bertrand and Cournot duopoly with differentiated products. Contrast to previous studies, we show that (i) firms have stronger incentive to collude under Bertrand competition than under Cournot competition in...