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Entry Effects on Cartel Stability and the Joint Executive Committee


  • Helder Vasconcelos



We extend Green and Porter's (1984) model to consider entry, by studying two alternative types of incumbent firms' post-entry reactions: cartel breakdown and accommodation of the entrants. We show that cooperation is more unstable if entry costs are low and if incumbents accommodate the new firms. We then test the applicability of the theoretical model to the type of collusion that characterizes the nineteenth-century railroad cartel in the US. The results provide support for the model predictions. In particular, cartel stability has been found to be negatively correlated with the number of firms in the agreement.

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  • Helder Vasconcelos, 2004. "Entry Effects on Cartel Stability and the Joint Executive Committee," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 219-241, May.
  • Handle: RePEc:kap:revind:v:24:y:2004:i:3:p:219-241

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    References listed on IDEAS

    1. Scott,John T., 2005. "Purposive Diversification and Economic Performance," Cambridge Books, Cambridge University Press, number 9780521022583, May.
    2. Kohn, Meir & Scott, John T, 1985. "Scale Economies in Research and Development: A Reply," Journal of Industrial Economics, Wiley Blackwell, vol. 33(3), pages 363-363, March.
    3. Stoneman, P & Ireland, N J, 1983. "The Role of Supply Factors in the Diffusion of New Process Technology," Economic Journal, Royal Economic Society, vol. 93(369a), pages 66-78, Supplemen.
    4. Stoneman, P, 1981. "Intra-Firm Diffusion, Bayesian Learning and Profitability," Economic Journal, Royal Economic Society, vol. 91(362), pages 375-388, June.
    5. Ireland, N & Stoneman, P, 1986. "Technological Diffusion, Expectations and Welfare," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 283-304, July.
    6. Scherer, F. M., 1983. "The propensity to patent," International Journal of Industrial Organization, Elsevier, vol. 1(1), pages 107-128, March.
    7. Jensen, Richard, 1982. "Adoption and diffusion of an innovation of uncertain profitability," Journal of Economic Theory, Elsevier, vol. 27(1), pages 182-193, June.
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    Cited by:

    1. J. Seldeslachts & T. Duso & E. Pennings, 2012. "On the Stability of Research Joint Ventures: Implications for Collusion," Review of Business and Economic Literature, Intersentia, vol. 57(1), pages 98-109, March.
    2. João Correia-da-Silva & Joana Pinho & Hélder Vasconcelos, 2016. "Sustaining collusion in markets with entry driven by balanced growth," Journal of Economics, Springer, vol. 118(1), pages 1-34, May.
    3. Goppelsroeder, Marie, 2009. "Entry in Collusive Markets: An Experimental Study," MPRA Paper 14707, University Library of Munich, Germany.
    4. João Correia-da-Silva & Joana Pinho & Hélder Vasconcelos, 2014. "Sustaining collusion in markets with a general evolution of demand," FEP Working Papers 537, Universidade do Porto, Faculdade de Economia do Porto.

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