Collusion in sales and maintenance markets for durable goods

This thesis analyses the stability of cartels of firms that sell a durable good and an associated maintenance service within a repeated game framework that features overlapping generations of consumers. We show that the most profitable collusive price settings correspond with the continuum of monopoly pricing strategies, within which a higher price in the durable good market is exchanged for lower price in the maintenance service market and vice versa. In our main result, we show that the strategy of colluding only in the durable good market at monopoly prices is easier to sustain than any other. Moreover, these price settings maximise the cartel's profits. We also present two extensions. In the first, we show that if the firms are able to exert monopoly control over their maintenance markets, then the potential for collusion is enhanced. In the second, we show that if the firms sell the maintenance service bundled with the durable good in the form of a warranty contract, the potential for collusion is diminished