TACIT COLLUSION WITH QUANTITY‐MATCHING PUNISHMENTS IN A HOMOGENEOUS MARKET*

Tacit collusion with quantity‐matching punishments in a homogeneous market is investigated. The findings are the following: (i) tacit collusion can arise with quantity‐matching punishments in a homogeneous market, (ii) the monopoly quantity cannot be supported by quantity‐matching punishment strategy, and (iii) compared with Nash‐reversion punishments, collusion is no easier to sustain, but not necessarily harder. The results are compared with those in Lu and Wright (International Journal of Industrial Organization, Vol. 28 (2010), pp. 298–306) with price‐matching punishments. A linear demand example is provided to illustrate the theory.