IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v30y1997i3p644-72.html
   My bibliography  Save this article

Cartel Unity over the Business Cycle

Author

Listed:
  • Mukesh Eswaran

Abstract

In this paper cartel behavior in business cycles when some firms are vulnerable to bankruptcy in the downturns is investigated. This vulnerability would restrict the set of collusive equilibria that are feasible in a repeated game and possibly result in a breakdown, in recessions, of all collusive agreements. It is demonstrated, however, that the existence of a low-cost producer in the cartel could prevent this breakdown. By adjusting market shares across the business cycle (and thereby eliminating the possibility of bankruptcy for its inefficient rivals), this ('swing') producer could enlarge the set of self-enforcing collusive equilibria. The results of this paper are seen to be consistent with a wide range of observations on the behavior of cartels over the business cycle.

Suggested Citation

  • Mukesh Eswaran, 1997. "Cartel Unity over the Business Cycle," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 644-672, August.
  • Handle: RePEc:cje:issued:v:30:y:1997:i:3:p:644-72
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0008-4085%28199708%2930%3A3%3C644%3ACUOTBC%3E2.0.CO%3B2-W
    Download Restriction: only available to JSTOR subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Orley Ashenfelter & Kathryn Graddy, 2005. "Anatomy of the Rise and Fall of a Price-Fixing Conspiracy: Auctions at Sotheby's and Christie's," Journal of Competition Law and Economics, Oxford University Press, vol. 1(1), pages 3-20.
    2. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    3. Richard Makadok, 2010. "The Interaction Effect of Rivalry Restraint and Competitive Advantage on Profit: Why the Whole Is Less Than the Sum of the Parts," Management Science, INFORMS, vol. 56(2), pages 356-372, February.
    4. repec:pri:cepsud:102ashenfelter is not listed on IDEAS
    5. Pierre-Pascal Gendron, 2001. "Corporation Tax Asymmetries and Cartel Unity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 659-674, November.
    6. Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
    7. Productivity Commission, 2005. "Review of Part X of the Trade Practices Act 1974: International Liner Cargo Shipping," Inquiry Reports, Productivity Commission, Government of Australia, number 32.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:30:y:1997:i:3:p:644-72. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler). General contact details of provider: http://edirc.repec.org/data/ceaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.