The result of Colombo and Labrecciosa (2006) that optimal punishments are inferior to Nash-reversion trigger strategies with decreasing marginal costs is due to the output when a firm deviates from the punishment path being allowed to become negative.
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Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number
E2007/27.
Length: 10 pages Date of creation: Oct 2007 Date of revision: Publication status: Published in Economics Letters, Vol. 105, 2009, pp. 56-57. Handle: RePEc:cdf:wpaper:2007/27
Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games D43 - Microeconomics - - Market Structure and Pricing - - - 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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