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The book deals with collusion between firms on both sides of a
market that is immune to deviations by coalitions. We study this
issue using an infinitely countably repeated game with discounting
of future single period payoffs. A strict strong perfect
equilibrium is the main solution concept that we apply. It requires
that no coalition of players in no subgame can weakly Pareto
improve the vector of continuation average discounted payoffs of
its members by a deviation. If the sum of firms' average discounted
profits is maximized along the equilibrium path then the
equilibrium output of each type of good is produced with the lowest
possible costs. If, in addition, all buyers are retailers (i.e.,
they resell the goods purchased in the analyzed market in a retail
market) then the equilibrium vector of the quantities sold in the
retail market is sold with the lowest possible selling costs. We
specify sufficient conditions under which collusion increases
consumer welfare.
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