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Cartel Stability and the Curvature of Market Demand

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  • Lambertini, Luca

Abstract

The stability of collusion is analysed for a family of demand functions whose curvature is determined by a parameter varying between zero and infinity. When the number of firms is low, firms may prefer to act as quantity setters in order to increase cartel stability if demand is sufficiently convex. Otherwise, price-setting behaviour enhances their ability to collude. As the number of firms tends to infinity, Cournot behaviour is preferable to Bertrand behaviour in order to stabilize collusion, independently of the characteristics of market demand. Copyright 1996 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Suggested Citation

  • Lambertini, Luca, 1996. "Cartel Stability and the Curvature of Market Demand," Bulletin of Economic Research, Wiley Blackwell, vol. 48(4), pages 329-334, October.
  • Handle: RePEc:bla:buecrs:v:48:y:1996:i:4:p:329-34
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    References listed on IDEAS

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    1. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    2. Majerus, David W., 1988. "Price vs. quantity competition in oligopoly supergames," Economics Letters, Elsevier, vol. 27(3), pages 293-297.
    3. Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
    4. 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.
    5. Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-327, June.
    6. Ross, Thomas W., 1992. "Cartel stability and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 1-13, March.
    7. repec:cor:louvrp:-702 is not listed on IDEAS
    8. Rees, Ray, 1985. "Cheating in a Duopoly Supergame," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 387-400, June.
    9. Donsimoni, Marie-Paule, 1985. "Stable heterogeneous cartels," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 451-467, December.
    10. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
    11. Hackner, Jonas, 1994. "Collusive pricing in markets for vertically differentiated products," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 155-177, June.
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    Cited by:

    1. David Collie, 2004. "Collusion and the elasticity of demand," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-6.
    2. Zimmerman, Paul R., 2010. "On the sustainability of collusion in Bertrand supergames with discrete pricing and nonlinear demand," MPRA Paper 20249, University Library of Munich, Germany.
    3. R. Cellini & L. Lambertini, 2000. "Non-Linear Market Demand and Capital Accumulation in A Differential Oligopoly Game," Working Papers 372, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Luca Lambertini, 2000. "Technology and Cartel Stability under Vertical Differentiation," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 421-442, November.
    5. Posada, P., 2000. "Cartel Stability and Product Differentiation: How Much Do the Size of the Cartel and the Size of the Industry Matter?," The Warwick Economics Research Paper Series (TWERPS) 556, University of Warwick, Department of Economics.
    6. L. Lambertini & M. Trombetta, 1997. "Delegation Affect Firms' Ability to Collude," Working Papers 275, Dipartimento Scienze Economiche, Universita' di Bologna.

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