Welfare-Enhancing Collusion in the Presence of a Competitive Fringe
AbstractFollowing the structure of many commodity markets, we consider a few large firms and a competitive fringe of many small suppliers choosing quantities in an infinite-horizon setting subject to demand shocks. We show that a collusive agreement among the large firms may not only bring an output contraction but also an output expansion (relative to the noncollusive output level). The latter occurs during booms, when the fringeÂ’s market share is more important, and is due to the strategic substitutability of quantities (we will never observe an output-expanding collusion in a price-setting game). In addition and depending on the fringeÂ’s market share the time at which maximal collusion is most difficult to sustain can be either at booms or recessions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 298.
Date of creation: 2005
Date of revision:
Other versions of this item:
- Juan-Pablo Montero & Juan Ignacio Guzmán, 2005. "Welfare-enhancing collusion in the presence of a competitive fringe," Working Papers 0511, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bos Iwan & Pot Erik, 2010. "Welfare-Enhancing Hard Core Cartels," Research Memorandum 004, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amparo García).
If references are entirely missing, you can add them using this form.