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Sustaining Collusion in Growing Markets

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  • Hélder Vasconcelos

Abstract

The impact of demand growth on the collusion possibilities is investigated in a Cournot supergame where market growth may trigger future entry and the collusive agreement is enforced by the most profitable ‘grim trigger strategies’ available. It is shown that even in situations where perfect collusion can be sustained after entry, coping with a potential entrant in a market which is growing over time may completely undermine any pre‐entry collusive plans of the incumbent firms. This is because, before entry, a deviation and the following punishment phase may become more attractive thanks to their additional effect in terms of delaying entry.

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  • Hélder Vasconcelos, 2008. "Sustaining Collusion in Growing Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(4), pages 973-1010, December.
    • Handle: RePEc:bla:jemstr:v:17:y:2008:i:4:p:973-1010
    DOI: 10.1111/j.1530-9134.2008.00202.x
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    Cited by:

    1. António Brandão & Joana Pinho & Hélder Vasconcelos, 2014. "Asymmetric Collusion with Growing Demand," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 429-472, December.
    2. Jun Zhou, 2016. "The dynamics of leniency application and the knock-on effect of cartel enforcement," Working Papers 13042, Bruegel.
    3. João Correia-da-Silva & Joana Pinho, 2018. "Collusion in mixed oligopolies and the coordinated effects of privatization," Journal of Economics, Springer, vol. 124(1), pages 19-55, May.
    4. Swoboda, Sandra Maria, 2018. "Market structure and cartel duration: Evidence from detected EU cartel cases," Arbeitspapiere 184, University of Münster, Institute for Cooperatives.
    5. Swoboda, Sandra Maria, 2017. "Einfluss ausgewählter Determinanten auf die Kartellbildung und -stabilität: Eine Literaturstudie," Arbeitspapiere 176, University of Münster, Institute for Cooperatives.
    6. Gärtner, D.L. & Zhou, J., 2012. "Delays in Leniency Application : Is There Really a Race to the Enforcer’s Door?," Other publications TiSEM cbb8fac0-0cd7-4a0c-a6d4-a, Tilburg University, School of Economics and Management.
    7. Andrei Y. Shastitko & Svetlana V. Golovanova, 2014. "Collusion in markets characterized by one large buyer: lessons learned from an antitrust case in Russia," HSE Working papers WP BRP 49/EC/2014, National Research University Higher School of Economics.
    8. João Correia-da-Silva & Joana Pinho & Hélder Vasconcelos, 2014. "Sustaining collusion in markets with a general evolution of demand," FEP Working Papers 537, Universidade do Porto, Faculdade de Economia do Porto.
    9. Gallice, Andrea, 2010. "The neglected effects of demand characteristics on the sustainability of collusion," Research in Economics, Elsevier, vol. 64(4), pages 240-246, December.
    10. Gärtner, Dennis L. & Zhou, Jun, 2012. "Delays in Leniency Application: Is There Really a Race to the Enforcer's Door?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 395, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    11. João Correia-da-Silva & Joana Pinho & Hélder Vasconcelos, 2016. "Sustaining collusion in markets with entry driven by balanced growth," Journal of Economics, Springer, vol. 118(1), pages 1-34, May.
    12. Rupayan Pal & Sumit Shrivastav, 2024. "Privacy regulation, cognitive ability, and stability of collusion," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2024-004, Indira Gandhi Institute of Development Research, Mumbai, India.
    13. Akinbosoye, Osayi & Bond, Eric W. & Syropoulos, Constantinos, 2012. "On the stability of multimarket collusion in price-setting supergames," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 253-264.
    14. Gärtner, D.L. & Zhou, J., 2012. "Delays in Leniency Application : Is There Really a Race to the Enforcer’s Door?," Discussion Paper 2012-044, Tilburg University, Tilburg Law and Economic Center.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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