Optimal Punishments in Linear Duopoly Supergames with Product Di ® erentiation 1

@inproceedings{LambertiniOptimalPI,
  title={Optimal Punishments in Linear Duopoly Supergames with Product Di ® erentiation 1},
  author={Luca Lambertini and - Dan Sasaki}
}
We analyse optimal penal codes in both Bertrand and Cournot supergames with product di®erentiation. We prove that the relationship between optimal punishments and the security level (individually rational discounted pro ̄t stream) depends critically on the degree of supermodularity in the stage game, using a linear duopoly supergame with product di®erentiation. The security level in the punishment phase is reached only under extreme supermodularity, i.e., when products are perfect substitutes… CONTINUE READING

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