We extend the Rotemberg-Saloner's (1986) [Rotemberg, J., Saloner, G., 1986. A supergame-theoretic model of price wars during booms. American Economic Review 76:390-407] "implicit collusion" framework to the consideration of capital market imperfections, captured by a non-zero probability of liquidation of firms in recessionary periods. We show that the Rotemberg-Saloner result of countercyclical markups is quite robust to the extension and, moreover, liquidation risks may even strengthen the degree of markup countercyclicality. (C) 1999 Elsevier Science S.A. All rights reserved.
Dalmazzo, A., Fabio, B. (1999). Liquidation risks in the Rotemberg-Saloner implicit collusion model. ECONOMICS LETTERS, 62(1), 69-74 [10.1016/S0165-1765(98)00210-9].
Liquidation risks in the Rotemberg-Saloner implicit collusion model
DALMAZZO, ALBERTO;
1999-01-01
Abstract
We extend the Rotemberg-Saloner's (1986) [Rotemberg, J., Saloner, G., 1986. A supergame-theoretic model of price wars during booms. American Economic Review 76:390-407] "implicit collusion" framework to the consideration of capital market imperfections, captured by a non-zero probability of liquidation of firms in recessionary periods. We show that the Rotemberg-Saloner result of countercyclical markups is quite robust to the extension and, moreover, liquidation risks may even strengthen the degree of markup countercyclicality. (C) 1999 Elsevier Science S.A. All rights reserved.
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https://hdl.handle.net/11365/7853
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