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On Globally Optimal Punishments in the Repeated Cournot Game

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  • F. Delbono
  • L. Lambertini

Abstract

We challenge the global optimality of one-shot punishments in infi?nitely repeated games with discounting. Speci?fically, we show that the stick-and-carrot punishment la Abreu (1986) may not be globally optimal. We prove our result by investigating tacit collusion in the infi?nite repetition of a linear Cournot game. We illustrate the existence of the stick-and-carrot globally optimal punishment for large cartels, and fully characterise it. Then, we show that for mall cartels, global optimality may be reached only with two-period punishments.

Suggested Citation

  • F. Delbono & L. Lambertini, 2016. "On Globally Optimal Punishments in the Repeated Cournot Game," Working Papers wp1091, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp1091
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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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