Chapter 1 investigates how dynamic diminishing marginal utility influences firms' ability to tacitly collude and shows that it crucially depends on whether diminishing marginal utility is product-specific or market-wide. When diminishing marginal utility is product-specific, i.e., when a consumer's consumption of one product this period only lowers her marginal utilities of a subset of products next period, collusion is easier to sustain since consumers can switch among firms to avoid utility loss on the equilibrium path, while at least some consumers cannot switch when a firm deviates to capture all consumers. When diminishing marginal utility is market-wide, i.e., when a consumer's consumption of one product this period lowers her marginal utilities of all products next period,...[ Read more ]

Chapter 1 investigates how dynamic diminishing marginal utility influences firms' ability to tacitly collude and shows that it crucially depends on whether diminishing marginal utility is product-specific or market-wide. When diminishing marginal utility is product-specific, i.e., when a consumer's consumption of one product this period only lowers her marginal utilities of a subset of products next period, collusion is easier to sustain since consumers can switch among firms to avoid utility loss on the equilibrium path, while at least some consumers cannot switch when a firm deviates to capture all consumers. When diminishing marginal utility is market-wide, i.e., when a consumer's consumption of one product this period lowers her marginal utilities of all products next period, collusion is harder to sustain due to endogenous demand fluctuations.

Chapter 2 studies collusion among experts with private information about customers' problems. On the equilibrium path, a customer's problem is fixed with probability one through search for second opinions. Even though a deviating expert can attract the customer with probability one by undercutting the equilibrium prices as in collusion among search-good sellers, the attracted customer will search for second opinions with positive probability and have her problem fixed by non-deviating experts. The deviating firms' inability to capture the entire industry profit before triggering a price war renders collusion among experts easier to sustain than collusion among search-good sellers.

Chapter 3 studies exclusive dealing when the incumbent may be displaced by a more efficient entrant due to the need of paying a fixed cost to stay active. We show that the incumbent can deter socially efficient entry through exclusive contracts under the one-buyer-one-supplier framework. This result continues to hold in the presence of product differentiation, where exclusion may be more likely to occur when the efficiency gap between the entrant and the incumbent falls into an intermediate range.