A note on cartel stability and endogenous sequencing with tacit collusion
AbstractWe use the concept of cartel stability defined by d'Aspremont et al. (1983) to obtain that the sequence of play between the cartel and the fringe affects cartel stability in a quantity-competition setting where firms tacitly collude. We also prove that an endogenous sequence of play between a cartel and a fringe depends on the discount factor. If the discount factor is large enough, the cartel and the fringe simultaneously choose quantities since the stable cartel may contain more firms under simultaneous play than under cartel leadership. This is due to the fact that under simultaneous play cartel firms have incentives to participate in the cartel because otherwise no collusion is possible.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economics.
Volume (Year): 96 (2009)
Issue (Month): 2 (March)
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Web page: http://www.springerlink.com/link.asp?id=108909
Collusion; Cartel stability; Stackelberg leadership; L11; L41; D43;
Other versions of this item:
- Marc Escrihuela Villar, 2008. "A note on cartel stability and endogenous sequencing with tacit collusion," DEA Working Papers 29, Universitat de les Illes Balears, Departament d'Economía Aplicada.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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