We provide a collusive framework with heterogeneity among firms investment,
entry, and exit. It is a symmetric-information model in which it is hard t
o sustain collusion when there is an active firm that is likely to exit in
the near future. Numerical analysis is used to compare a collusive to a non
collusive environment, Only the collusive industry generates price wars. Al
so, the collusive industry offers both more and higher-quality products to
consumers, albeit often at a higher price. The positive effect of collusion
on variety and quality more than compensates consumers for the negative ef
fect of collusive prices, so that consumer surplus is larger with collusion
.