Does cartel leadership facilitate collusion?
AbstractWe discuss the implications of a Stackelberg sequence of play between a cartel and the fringe. We consider two different approaches to collusion: (i) one-stage static model and (ii) a multi-period oligopoly model. Our main result is that in the static model with quantity-setting firms a stable cartel only exist when cartel firms behave as a Stackelberg leader. It is also shown that in the supergame approach the cartel is always more easily sustained with the leadership than in the simultaneous-moves game. The opposite result is obtained in a price-setting supergame with differentiated products.
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Bibliographic InfoPaper provided by Universitat de les Illes Balears, Departament d'Economía Aplicada in its series DEA Working Papers with number 39.
Date of creation: 2009
Date of revision:
Collusion; Leadership; Stability; Sustainability;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-COM-2010-01-10 (Industrial Competition)
- NEP-IND-2010-01-10 (Industrial Organization)
- NEP-MIC-2010-01-10 (Microeconomics)
- NEP-REG-2010-01-10 (Regulation)
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CORE Discussion Papers RP
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