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Leadership Cartels in Industries with Differentiated Products

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  • Posada, Pedro

Abstract

This article analyses cartels that act as a Stackelberg leader with respect to a competitive fringe in industries supplying di¤erentiated products. The main objectives are to investigate how cartel stability changes with the degree of di¤erentiation and the cartel size, to predict endogenous cartels and to carry out a welfare analysis. Both repeated and static games are considered as well as industries competing in quantities and prices. The results indicate that the degree of stability can be either an increasing, decreasing or non-monotonic function of the degree of product di¤erentiation, depending on the cartel size, the industry size, the competition type and the reaction of cartel loyal members to defection. An endogenous cartel size is also predicted. Other signi…cant results are: some cartels can be sustained under simple static game Nash equilibrium, some cartels may be socially desirable, not all cartels are beneficial for the fringe members and a free riding problem does not necessarily emerge.

Suggested Citation

  • Posada, Pedro, 2001. "Leadership Cartels in Industries with Differentiated Products," Economic Research Papers 269361, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269361
    DOI: 10.22004/ag.econ.269361
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    Cited by:

    1. Mariana Cunha & Paula Sarmento, 2014. "Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 1-38, March.
    2. Marc Escrihuela-Villar, 2009. "Does cartel leadership facilitate collusion?," DEA Working Papers 39, Universitat de les Illes Balears, Departament d'Economía Aplicada.

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    Industrial Organization; Public Economics;

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