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On Collusion Sustainability and the Elasticity of Substitution

Marc Escrihuela-Villar

Games2026https://doi.org/10.3390/g17010005article
AJG 1ABDC B
Weight
0.50

Abstract

We analyze the relationship between collusion sustainability in an infinitely repeated game using trigger strategies and the elasticity of substitution. To this end, we adopt a demand function with constant elasticity of substitution between the differentiated goods. Since our model exhibits a one-to-one relationship between the elasticity of substitution and demand price elasticity, we demonstrate that a larger elasticity decreases the sustainability of collusion. Intuitively, a more elastic demand function causes the increase in deviation profits to compensate for the increase in collusive profits, making collusion less easily sustained. This result holds regardless of whether firms compete in quantities or prices.

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https://doi.org/https://doi.org/10.3390/g17010005

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@article{marc2026,
  title        = {{On Collusion Sustainability and the Elasticity of Substitution}},
  author       = {Marc Escrihuela-Villar},
  journal      = {Games},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.3390/g17010005},
}

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On Collusion Sustainability and the Elasticity of Substitution

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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