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Are optimal punishments always optimal?

Author

Listed:
  • Luca Colombo

    (Middlesex University, London, UK and University of Bologna, Italy)

  • Paola Labrecciosa

    (Middlesex University, London, UK and University of Bologna, Italy)

  • Luca Lambertini

    (University of Bologna, Italy and University of Amsterdam, The Netherlands and The Rimini Centre for Economic Analysis, Italy)

Abstract

The seminal paper by Abreu (1986) is revisited to reassess the optimality of one-shot stick-and-carrot punishments. It is shown that there are admissible conditions under which the use of grim trigger strategies with an infinite Nash reversion is more efficient than implementing Abreu's penal code in stabilizing collusion.

Suggested Citation

  • Luca Colombo & Paola Labrecciosa & Luca Lambertini, 2008. "Are optimal punishments always optimal?," Working Paper series 01_08, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:01_08
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    File URL: http://www.rcea.org/RePEc/pdf/wp01_08.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    optimal penal code; grim trigger strategy; cartel stability;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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