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Powstawanie i stabilność karteli heterogenicznych
[The emergence and stability of heterogeneous cartels]

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  • Prokop, Jacek

Abstract

The article focuses on the emergence and operation of cartels in sectors in which companies differ in terms of production costs. The author shows that stable cartels can operate in sectors made up of enterprises that are heterogeneous in terms of costs and based on price leadership. However, when it comes to the cartel formation process, there is a distinct difference between homogeneous and heterogeneous sectors. While the formation of a cartel in the case of homogenous firms may be difficult due to the 'free-rider' problem, the author notes, in the case of heterogeneous companies no such obstacles exist and it can be expected that the process of creating a stable cartel will end in success. The analysis was made using the author's own model of the cartel formation process in the form of a single-period non-cooperative game with simultaneous decisions made by participants. To investigate the behavior of enterprises in the formation and operation of cartels, the Nash equilibrium concept was used. On the basis of the results obtained, it can be concluded that in the case of a sector with heterogeneous enterprises, the role of antitrust offices significantly increased in comparison to markets with homogenous firms. The theoretical analysis made by the author is illustrated with a case study for a district heating pipe cartel.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43712.

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Date of creation: Oct 2011
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Publication status: Published in Gospodarka Narodowa 10.80/21(2011): pp. 39-57
Handle: RePEc:pra:mprapa:43712

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Related research

Keywords: cartels; cost heterogeneity; cartel stability; cartel formation process; antitrust policy;

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References

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  1. Morasch, Karl, 2000. "Strategic alliances as Stackelberg cartels - concept and equilibrium alliance structure," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 257-282, February.
  2. Donsimoni, Marie-Paule, 1985. "Stable heterogeneous cartels," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 451-467, December.
  3. Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Working Papers 008, Bielefeld University, Center for Mathematical Economics.
  4. Prokop, Jacek, 1999. "Process of dominant-cartel formation," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 241-257, February.
  5. Effrosyni Diamantoudi, 2005. "Stable cartels revisited," Economic Theory, Springer, vol. 26(4), pages 907-921, November.
  6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  7. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
  8. Valerie Y. Suslow, 2005. "Cartel contract duration: empirical evidence from inter-war international cartels," Industrial and Corporate Change, Oxford University Press, vol. 14(5), pages 705-744, October.
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Cited by:
  1. Prokop, Jacek & Karbowski, Adam, 2013. "R&D cooperation and industry cartelization," Economics Discussion Papers 2013-41, Kiel Institute for the World Economy.

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