SUSTAINABLE COLLUSION IN OLIGOPOLY WITH FREE ENTRY

We investigate the stability of collusion in a market where firms cann ot prevent entry. In a symmetric, homogeneous oligopoly there are coll usive long-run equilibria under which the colluders obtain positive ec onomic rents while they do not prevent entry of firms up to a maximum equal to the largest number of firms sustainable at a single shot equi librium. The collusion is not generous to new entrants; their profits are a little better than those associated with the discounted single s hot equilibrium. Eventually entrants obtain profits equal to the incum bent firms. We extend the results to asymmetric, differentiated oligop olies.