Collusion in a differentiated duopoly with network externalities

- Conventional wisdom is that collusion between firms will be destabilized when they produce closer substitutes of products.
- We show that in the presence of strong network externalities, this result no longer holds.
- Collusion becomes more sustainable for closer substitutes of products under relatively strong network externalities.

Conventional wisdom is that collusion between firms will be destabilized when they produce closer substitutes of products. We show that, in the presence of strong network externalities, this result no longer holds, and collusion becomes more sustainable for closer substitutes of products under relatively strong network externalities.