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Farsighted Coalitional Stability Of A Price Leadership Cartel

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  • YOSHIO KAMIJO
  • SHIGEO MUTO

Abstract

This paper analyzes the farsighted behaviour of firms that form a dominant price leadership cartel. We consider stability concepts such as the farsighted core, the farsighted stable sets, and the largest consistent set. We show that: (i) the farsighted core is either an empty set or a singleton set of the grand cartel; (ii) any Pareto efficient cartel is itself a farsighted stable set; and (iii) the set of cartels in which fringe firms enjoy higher profits than the firms in the minimal Pareto efficient cartel is the largest consistent set.

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File URL: http://hdl.handle.net/10.1111/j.1468-5876.2009.00499.x
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Bibliographic Info

Article provided by Japanese Economic Association in its journal Japanese Economic Review.

Volume (Year): 61 (2010)
Issue (Month): 4 (December)
Pages: 455-465

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Handle: RePEc:bla:jecrev:v:61:y:2010:i:4:p:455-465

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Related research

Keywords: C71 ; D43 ; L13 ;

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References

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  1. Page Jr, Frank H & Wooders, Myrna H, 2005. "Strategic Basins of Attraction, the Farsighted Core, and Network Formation Games," The Warwick Economics Research Paper Series (TWERPS) 724, University of Warwick, Department of Economics.
  2. John C. Harsanyi, 1974. "An Equilibrium-Point Interpretation of Stable Sets and a Proposed Alternative Definition," Management Science, INFORMS, vol. 20(11), pages 1472-1495, July.
  3. Prokop, Jacek, 1999. "Process of dominant-cartel formation," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 241-257, February.
  4. Effrosyni Diamantoudi, 2005. "Stable cartels revisited," Economic Theory, Springer, vol. 26(4), pages 907-921, November.
  5. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
  6. Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
  7. Akihiro Suzuki & Shigeo Muto, 2005. "Farsighted Stability in an n-Person Prisoner’s Dilemma," International Journal of Game Theory, Springer, vol. 33(3), pages 431-445, 09.
  8. Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Working Papers 008, Bielefeld University, Center for Mathematical Economics.
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Cited by:
  1. Junnosuke Shino, 2008. "Farsighted Stable Sets in Hotelling's Location Games," Departmental Working Papers 200808, Rutgers University, Department of Economics.

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