Toomas Hinnosaar (University of Nottingham) will present “Collusion without Patience” (with Jacopo Bizzotto) on April 15th, 2026, from 2:30 PM to 3:45 PM, in room QA404.
Abstract:
Tacit collusion is usually linked to repeated interactions between patient firms. We show that it can also arise in a one-shot duopoly. When firms choose capacities and face outsourcing contracts with minimum order quantities, gaps in feasible outputs allow commitment not to sell intermediate quantities. For a range of parameters, there exists a collusive equilibrium in which both firms produce less and earn more than under competition. Three other equilibria can also arise: competitive, leadership, and miscoordination. We then extend the model to general two-sided limited commitment and show that it yields the same set of equilibria.