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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. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
  2. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
  3. Aubert, Cécile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," Economics Papers from University Paris Dauphine 123456789/13637, Paris Dauphine University.
  4. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
  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. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  7. Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
  8. 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.
  9. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
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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. António Brandão & Joana Pinho & Hélder Vasconcelos, 2013. "Asymmetric collusion with growing demand," FEP Working Papers 510, Universidade do Porto, Faculdade de Economia do Porto.
  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.
  4. 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.
  5. 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.
  6. 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.

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