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On endogenous cartel size under tacit collusion

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Author Info

  • Marc Escrihuela-Villar

    (Universidad de Guanajuato)

Abstract

We analyze how the size of a cartel affects the possibility to sustain a collusive agreement. We develop a multi-period oligopoly model with homogeneous, quantity-setting firms, a subset of which are assumed to collude, while the remaining (fringe) firms choose their output levels noncooperatively. We show that, in our model, collusion is easier to sustain the larger the cartel is. The implications of this result on the incentives of firms to participate in a cartel are analyzed. We obtain that a firm is only willing to collude when otherwise collusion cannot be sustained.

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Bibliographic Info

Article provided by Fundación SEPI in its journal Investigaciones Económicas.

Volume (Year): 32 (2008)
Issue (Month): 3 (September)
Pages: 325-338

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Handle: RePEc:iec:inveco:v:32:y:2008:i:3:p:325-338

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Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
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Related research

Keywords: Collusion; partial cartels; trigger strategies; optimal punishment.;

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Cited by:
  1. Pedro Mendi & Róbert F. Veszteg, 2009. "Sustainability of collusion: evidence from the late 19th century basque iron and steel industry," Investigaciones Economicas, Fundación SEPI, vol. 33(3), pages 385-405, September.

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