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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

2 Issues per year


IMPACT FACTOR 2016: 0.229
5-year IMPACT FACTOR: 0.271

CiteScore 2016: 0.30

SCImago Journal Rank (SJR) 2016: 0.398
Source Normalized Impact per Paper (SNIP) 2016: 0.232

Mathematical Citation Quotient (MCQ) 2016: 0.08

Online
ISSN
1935-1704
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Tacit Collusion in Capacity Investment: The Role of Capacity Exchanges

Christian Hogendorn
Published Online: 2007-07-17 | DOI: https://doi.org/10.2202/1935-1704.1306

In many capacity-intensive industries (e.g. electricity, bandwidth), exchanges allow firms, including competitors, to buy and sell wholesale capacity before selling on the retail market. Capacity exchanges allow firms to smooth demand shocks, but do they also facilitate tacit collusion to limit capacity investment? This paper models investment and exchange in a one-shot game and in a repeated game with tacit collusion. It finds that the presence of the exchange does not reduce total capacity investment, and thus does not raise consumer prices. In fact, the exchange may make it more difficult to sustain tacit collusion.

Keywords: capacity investment; capacity exchanges; business to business exchanges; tacit collusion

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Published Online: 2007-07-17


Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, DOI: https://doi.org/10.2202/1935-1704.1306.

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