Competitive Advantage and Collusion

In oligopoly models, the symmetric case is special theoretically and neglects asymmetries that may be important empirically. This essay analyzes the implications of cost differences for collusive oligopoly equilibria. Four different technologies for effecting collusion, which are essentially identical in the symmetric case, are considered. Axiomatic bargaining models are employed with simple functional forms to produce quantitative measures of the effects of cost differences and numbers of rivals. Low-cost firms with large shares in Cournot equilibrium are seen to have little to gain from collusion. Implications for the estimation and interpretation of conjectural variations are explored