Resale and collusion in a dynamic market for semidurable goods

The paper studies the incentives to form collusive agreements when goods can be traded in second-hand markets. It will be shown that such incentives crucially depend on the rate of depreciation of the durable good and on consumer heterogeneity. The main contribution of the paper shows that an active second-hand market may strengthen the incentives to collude, as do policies that affect the functioning of the second-hand market (e.g., leasing policy and buy-back). It will also be argued that the oligopoly incentives to adopt strategies that strengthen collusion often differ from the monopoly incentives to increase profits.