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The profit-sharing rule that maximizes sustainability of cartel agreements

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  • João Correia-da-Silva

    ()
    (CEF.UP and Faculdade de Economia, Universidade do Porto)

  • Joana Pinho

    ()
    (FCT and RGEA, Universidad de Vigo)

Abstract

We propose a profit-sharing rule that maximizes sustainability of cartel agreements. This rule is such that the critical discount factor is the same for all the firms. If a cartel applies this rule, then asymmetries among firms may not hinder collusion (contrarily to the typical finding in the literature). In the simplest case of a Cournot duopoly in which firms differ in their stocks of capital, we find that the cartel is the least sustainable when one of the firms is approximately two times bigger than the other.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 463.

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Length: 8 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:por:fepwps:463

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Keywords: Collusion sustainability; Profit-sharing rule.;

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  1. Duarte N. Leite & Sandra T. Silva & Óscar Afonso, 2012. "Institutions, Economics and the Development Quest," FEP Working Papers 457, Universidade do Porto, Faculdade de Economia do Porto.
  2. Duarte Guimarães & Ana Paula Ribeiro & Sandra Tavares Silva, 2012. "Macroeconomic Fundamentals of Poverty and Deprivation: an empirical study for developed countries," FEP Working Papers 460, Universidade do Porto, Faculdade de Economia do Porto.
  3. Sara Santos Cruz & Aurora A.C. Teixeira, 2012. "Methodological approaches for measuring the creative employment: a critical appraisal with an application to Portugal," FEP Working Papers 455, Universidade do Porto, Faculdade de Economia do Porto.
  4. Raquel Meneses & Carlos Brito, 2012. "A Dynamic Approach To The Development Of International New Ventures," FEP Working Papers 454, Universidade do Porto, Faculdade de Economia do Porto.
  5. Sara Santos Cruz & Aurora A.C. Teixeira, 2012. "Industry-based methodological approaches to the measurement of Creative Industries: a theoretical and empirical account," FEP Working Papers 453, Universidade do Porto, Faculdade de Economia do Porto.
  6. Vera Catarina Rocha, 2012. "The entrepreneur in economic theory: from an invisible man toward a new research field," FEP Working Papers 459, Universidade do Porto, Faculdade de Economia do Porto.
  7. Liliana Fernandes & Américo Mendes & Aurora Teixeira, 2012. "Assessing child well-being through a new multidimensional child-based weighting scheme index: an empirical estimation for Portugal," Working Papers de Economia (Economics Working Papers) 02, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto).
  8. Pedro Cosme Costa Vieira, 2012. "A low cost supercritical Nuclear + Coal 3.0 Gwe power plant," FEP Working Papers 461, Universidade do Porto, Faculdade de Economia do Porto.
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Cited by:
  1. Andreea Stoian & Rui Henrique Alves, 2012. "Can EU high indebted countries manage to fulfill fiscal sustainability? Some evidence from the solvency constraint," FEP Working Papers 464, Universidade do Porto, Faculdade de Economia do Porto.
  2. Abel L. Costa Fernandes & Paulo R. Mota, 2012. "Triffin’s Dilemma Again and the Efficient Level of U.S. Government Debt," FEP Working Papers 469, Universidade do Porto, Faculdade de Economia do Porto.

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