In this article, we use a simple mean-variance set up, where two symmetric Â…firms are competing in quantities, and investigate the impact of demand variability on the stability of collusion.

We consider two products traded in two duopoly markets, where competition is assumed a la Hotelling. Firms A and B are operating in Market 1, while Firm B is also competing in Market 2 with Firm C. Prices in Market 2 are pegged linearly to the average price in Market 1. We show that price...