Competitive Prices as Profit-Maximizing Cartel Prices
AbstractEven under antitrust enforcement, firms may still form a cartel in an infinitely-repeated oligopoly model when the discount factor is sufficiently close to one. We present a linear oligopoly model where the profit-maximizing cartel price converges to the competitive equilibrium price as the discount factor goes to one. We then identify a set of necessary conditions for this seemingly counter-intuitive result.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-047/1.
Date of creation: 27 Apr 2010
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Antitrust enforcement; Cartel; Oligopoly; Repeated game;
Find related papers by JEL classification:
- L4 - Industrial Organization - - Antitrust Issues and Policies
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-BEC-2011-02-26 (Business Economics)
- NEP-COM-2011-02-26 (Industrial Competition)
- NEP-IND-2011-02-26 (Industrial Organization)
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