Collusive Market Structure under Learning-by-Doing and Increasing Returns.

Learning-by-doing and increasing returns are often perceived to have similar implications for market structure and conduct. The authors analyze this in the context of an infinite-horizon, price-setting game. Learning is shown to not reduce the viability of market-sharing collusion between a given number of firms, whereas intraperiod increasing returns invariably does. The authors subsequently develop a model where the number of active firms is determined endogenously under the assumption that the postentry game is collusive. In this model, learning has no effect on concentration, while scale economies increase concentration. Copyright 1991 by The Review of Economic Studies Limited.