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original papers : Buyers' and sellers' cartels on markets with indivisible goods

Author

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  • Francis Bloch
  • Sayantan Ghosal

Abstract

This paper analyzes the formation of cartels of buyers and sellers in a simple model of trade inspired by Rubinstein and Wolinsky's (1990) bargaining model. When cartels are formed only on one side of the market, there is at most one stable cartel size. When cartels are formed sequentially on the two sides of the market, there is also at most one stable cartel configuration. Under bilateral collusion, buyers and sellers form cartels of equal sizes, and the cartels formed are smaller than under unilateral collusion. Both the buyers' and sellers' cartels choose to exclude only one trader from the market. This result suggests that there are limits to bilateral collusion, and that the threat of collusion on one side of the market does not lead to increased collusion on the other side.

Suggested Citation

  • Francis Bloch & Sayantan Ghosal, 2000. "original papers : Buyers' and sellers' cartels on markets with indivisible goods," Review of Economic Design, Springer;Society for Economic Design, vol. 5(2), pages 129-147.
  • Handle: RePEc:spr:reecde:v:5:y:2000:i:2:p:129-147
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    Cited by:

    1. O. Tejada & M. Álvarez-Mozos, 2016. "Vertical syndication-proof competitive prices in multilateral assignment markets," Review of Economic Design, Springer;Society for Economic Design, vol. 20(4), pages 289-327, December.

    More about this item

    Keywords

    Bilateral collusion; buyers' and sellers' cartels; collusion in bargaining; countervailing power;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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