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Coalitional Approaches to Collusive Agreements in Oligopoly Games

  • Sergio Currarini

    ()

    (University of Leicester, Universita' di Venezia and Euro-Mediterranean Center on Climate Change)

  • Marco A. Marini

    ()

    (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

In this paper we review a number of coalitional solution concepts for the analysis of cartel and merger stability in oligopoly. We show that, although so far the industrial organization and the cooperative game-theoretic literature have proceeded somehow independently on this topic, the two approaches are highly inter-connected. We first consider the basic problem of the stability of the whole industry association of firms under oligopoly and, for this purpose, we introduce the concept of core in oligopoly games. We show that different assumptions on the behaviour as well as on the timing of the coalitions of firms yield very different results on the set of allocations which are core-stable. We then consider the stability of associations of firms organized in coalition structures different from the grand coalition. To this end, various coalition formation games recently introduced by the so called endogenous coalition formation literature are critically reviewed. Again, different assumptions concerning the timing and the behaviour of firms are shown to yield a wide range of different results. We conclude by reviewing some recent extensions of the coalitional analysis to oligopolistic markets with heterogeneous firms and incomplete information.

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File URL: http://www.dis.uniroma1.it/~bibdis/RePEc/aeg/report/2013-15.pdf
File Function: Revised version, 2013
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Paper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIAG Technical Reports with number 2013-15.

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Date of creation: 2013
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Handle: RePEc:aeg:report:2013-15
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