Inefficiency in Repeated Cournot Oligopoly Games
AbstractA widely accepted view says that Folk Theorem holds in the repeated Cournot oligopoly games with imperfect price signals satisfying generic conditions. We show that this view is not justi- fied. We argue that maintaining asymptotic joint monopoly outcome is not possible with noisy price signals. When firms have the choice of increasing outputs at equilibrium as a deviation strategy, it is not possible to maintain such collusive outcome, even if the discount rate is close to 1.
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Bibliographic InfoPaper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number 05.12.
Length: 19 pages
Date of creation: Jan 2005
Date of revision:
Oligopoly; ineffciency; repeated games; imperfect price signal; Folk Theorem;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-03 (All new papers)
- NEP-COM-2005-04-03 (Industrial Competition)
- NEP-IND-2005-04-03 (Industrial Organization)
- NEP-MIC-2005-04-03 (Microeconomics)
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