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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." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 17 (2008)
Issue (Month): 4 (December)
Pages: 973-1010

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Handle: RePEc:bla:jemstr:v:17:y:2008:i:4:p:973-1010

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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References

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  1. Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  3. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  4. Aubert, Cécile & Kovacic, William & Rey, Patrick, 2006. "The Impact of Leniency and Whistleblowing Programs on Cartels," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  5. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  6. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
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Cited by:
  1. Andrea Gallice, 2008. "The Neglected Effects of Demand Characteristics on the Sustainability of Collusion," ICER Working Papers 03-2008, ICER - International Centre for Economic Research.
  2. 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.
  3. 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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