Cost raising strategies in a symmetric, dynamic duopoly

This paper provides a characterisation of the set of dynamic models in which symmetric duopolists have incentives to raise their common cost. The dynamic analysis has two advantages over existing static models. First, it avoids conceptual weaknesses, allowing conjectures to be derived endogenously rather than imposed. Secondly, it extends the conditions (restrictive in static models) under which symmetric cost raising is profitable. The model is illustrated by standard examples from industrial organisation (quantity and price adjustment, and learning-by-doing).