The Determination of Price and Output Quotas in a Heterogeneous Cartel
Applying a selection criterion that uses both subgame perfection and the Nash bargaining solution, this paper investigates the relationship between firms' cost functions and collusive behavior. It is found that the optimal collusive price exceeds the price that the low-cost firm would set if it was a monopolist. Comparative statics reveal that the optimal collusive price is increasing in the low-cost-firm's unit cost, but is decreasing in the high-cost-firm's unit cost when the cost differential between firms is sufficiently large. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Volume (Year): 32 (1991)
Issue (Month): 4 (November)
|Contact details of provider:|| Postal: |
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ierEmail:
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:32:y:1991:i:4:p:767-92. 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: (Wiley-Blackwell Digital Licensing)or ()
If references are entirely missing, you can add them using this form.