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Non-Negative Quantity Constraints and the Duration of Punishment

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Author Info

  • Lambertini, L.
  • Sasaki, D.

Abstract

In an oligopoly supergame, firms face an obvious technological constraint: the positivity of their production quantities. WE show that Lambson's (1987) result on "security-level punishment", that the single-period punishment makes the firm's discounted participation condition just bind, holds only in a Bertrand supergame with perfect substitutes. In general, the sustainability of collusion by means of single-period penal codes hinges critically upon the degree of supermodularity in the stage game, as well as upon the positivity constraints on prices and/or quantities.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 630.

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Length: 19 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:mlb:wpaper:630

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Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
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Web page: http://www.economics.unimelb.edu.au
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Keywords: GAMES ; OLIGOPOLIES ; PENAL SANCTIONS;

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Cited by:
  1. Baldelli, Serena & Lambertini, Luca, 2006. "Price vs quantity in a duopoly supergame with Nash punishments," Research in Economics, Elsevier, vol. 60(3), pages 121-130, September.
  2. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2009. "Optimal Collusion with Limited Severity Constraint," Working Papers 0909, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. Robert Gagné & Simon van Norden & Bruno Versaevel, 2006. "Testing Optimal Punishment Mechanisms under Price Regulation: the Case of the Retail Market for Gasoline," Cahiers de recherche 06-12, HEC Montréal, Institut d'économie appliquée.
  4. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2013. "Optimal collusion with limited liability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(3), pages 203-227, 09.
  5. Flochel, Laurent & Versaevel, Bruno & de Villemeur, Étienne, 2009. "Optimal Collusion with Limited Liability and Policy Implications," IDEI Working Papers 547, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2011.
  6. S. Baldelli & L. Lambertini, 2004. "The gains from cooperative R&D with a concave technology and spillovers," Working Papers 510, Dipartimento Scienze Economiche, Universita' di Bologna.

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