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Farsighted Coalitional Stability Of A Price Leadership Cartel

  • YOSHIO KAMIJO
  • SHIGEO MUTO

This paper analyzes the farsighted behaviour of firms that form a dominant price leadership cartel. We consider stability concepts such as the farsighted core, the farsighted stable sets, and the largest consistent set. We show that: (i) the farsighted core is either an empty set or a singleton set of the grand cartel; (ii) any Pareto efficient cartel is itself a farsighted stable set; and (iii) the set of cartels in which fringe firms enjoy higher profits than the firms in the minimal Pareto efficient cartel is the largest consistent set.

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File URL: http://hdl.handle.net/10.1111/j.1468-5876.2009.00499.x
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Article provided by Japanese Economic Association in its journal Japanese Economic Review.

Volume (Year): 61 (2010)
Issue (Month): 4 (December)
Pages: 455-465

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Handle: RePEc:bla:jecrev:v:61:y:2010:i:4:p:455-465
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  1. Frank H. Page, Jr. & Myrna H. Wooders, 2005. "Strategic Basins of Attraction, the Farsighted Core, and Network Formation Games," Working Papers 2005.36, Fondazione Eni Enrico Mattei.
  2. John C. Harsanyi, 1974. "An Equilibrium-Point Interpretation of Stable Sets and a Proposed Alternative Definition," Management Science, INFORMS, vol. 20(11), pages 1472-1495, July.
  3. Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Working Papers 008, Bielefeld University, Center for Mathematical Economics.
  4. Akihiro Suzuki & Shigeo Muto, 2005. "Farsighted Stability in an n-Person Prisoner’s Dilemma," International Journal of Game Theory, Springer, vol. 33(3), pages 431-445, 09.
  5. d'ASPREMONT, Claude & JACQUEMIN, Alexis & GABSZEWICZ, Jean J. & WEYMARK, John A., . "On the stability of collusive price leadership," CORE Discussion Papers RP -522, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
  7. Effrosyni Diamantoudi, 2005. "Stable cartels revisited," Economic Theory, Springer, vol. 26(4), pages 907-921, November.
  8. Prokop, Jacek, 1999. "Process of dominant-cartel formation," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 241-257, February.
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