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Spillover Effects and the Stability of Cartels

Author

Listed:
  • Michał Piętal
  • Marcin Paszko

Abstract

It is widely recognized that competition is the most optimal way to ensure economic efficiency and satisfy consumer needs. However, companies are naturally motivated to gain a monopoly position, as this would increase their profits and lower their marketing expenditure. Competition policy, however, is effective in preventing this so long as appropriate regulations are in force when required. If the market is able to ensure competition unaided (e.g. in a perfectly competitive market), government intervention is not only superfluous, but costly and even socially harmful. This paper examines Nash equilibria for the classic Cournot model, as elaborated by Prokop (2011), and extends the results of that paper to cover know-how spillover scenarios. The authors consider sound and novel suggestions concerning cartels in terms of industrial policy on pro-innovation activities. This is because formally stable cartels tend to destabilize in the face of market-related (IP-related) events. The paper introduces, observes and elaborates this phenomenon.

Suggested Citation

  • Michał Piętal & Marcin Paszko, 2025. "Spillover Effects and the Stability of Cartels," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 2, pages 200-220.
    • Handle: RePEc:aoq:ekonom:y:2025:i:2:p:200-220
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    References listed on IDEAS

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    1. 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.
    2. Grzegorz W. Kolodko, 2014. "The New Pragmatism, or economics and policy for the future," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(2), pages 139-160, June.
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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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