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Small Heterogeneous Cartels

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  • Sabine Böckem

Abstract

Economic theories explaining the existence of stable cartels are still rare. The paper offers a generalization of the D'Aspremont, Jacquemin, Gabszewicz and Weymark [1983] approach of stable cartels in a static "small world" framework taking into account that suppliers may differ with respect to their cost structure. Predictions concerning the number of cartel members and the cartel structure are derived: One does always observe a small cartel. Cartel size decreases with the overall number of suppliers in the market. Changes on the demand side have an ambiguous effect on cartel size. An exogenous demand reduction can even strengthen a cartel such as OPEC.

Suggested Citation

  • Sabine Böckem, 1998. "Small Heterogeneous Cartels," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(3), pages 572-588, September.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199809)154:3_572:shc_2.0.tx_2-8
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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

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