IDEAS home Printed from https://ideas.repec.org/p/bol/bodewp/wp1091.html
   My bibliography  Save this paper

On Globally Optimal Punishments in the Repeated Cournot Game

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://amsacta.unibo.it/5483/1/WP1091.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    2. James W. Friedman, 1973. "A Non-cooperative Equilibrium for Supergames: A Correction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 435-435.
    3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    4. Majerus, David W., 1988. "Price vs. quantity competition in oligopoly supergames," Economics Letters, Elsevier, vol. 27(3), pages 293-297.
    5. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    6. Geroski, P.A., 1988. "James Friedman, Game Theory with Applications to Economics, Oxford University Press, Cambridge, Massachusetts and London, England (1986), p. 262," International Journal of Industrial Organization, Elsevier, vol. 6(2), pages 275-277.
    7. Lambertini, Luca, 1997. "Prisoners' Dilemma in Duopoly (Super)Games," Journal of Economic Theory, Elsevier, vol. 77(1), pages 181-191, November.
    8. Rothschild, R., 1992. "On the sustainability of collusion in differentiated duopolies," Economics Letters, Elsevier, vol. 40(1), pages 33-37, September.
    9. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    10. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    11. R.Rothschild, "undated". "The Sustainability Of Collusion When Demand Increases," Working Papers ec3/92, Department of Economics, University of Lancaster.
    12. Luca Lambertini & Dan Sasaki, 2002. "Non‐Negative Quantity Constraints and the Duration of Punishment," The Japanese Economic Review, Japanese Economic Association, vol. 53(1), pages 77-93, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baldelli, Serena & Lambertini, Luca, 2006. "Price vs quantity in a duopoly supergame with Nash punishments," Research in Economics, Elsevier, vol. 60(3), pages 121-130, September.
    2. Lambertini, Luca & Marattin, Luigi, 2021. "On prices’ cyclical behaviour in oligopolistic markets," Research in Economics, Elsevier, vol. 75(1), pages 79-86.
    3. Luca Lambertini, 2000. "Technology and Cartel Stability under Vertical Differentiation," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 421-442, November.
    4. Panayiotis Agisilaou, 2013. "Collusion in Industrial Economics and Optimally Designed Leniency Programmes - A Survey," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-03, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    5. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    6. Lambertini, Luca, 1997. "Prisoners' Dilemma in Duopoly (Super)Games," Journal of Economic Theory, Elsevier, vol. 77(1), pages 181-191, November.
    7. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2013. "Optimal collusion with limited liability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(3), pages 203-227, September.
    8. Lambertini, L. & Sasaki, D., 1999. "A Cost-Side Analysis on Collusive Sustainability," Department of Economics - Working Papers Series 710, The University of Melbourne.
    9. Stefano Colombo, 2009. "Sustainability of collusion with imperfect price discrimination and inelastic demand functions," Economics Bulletin, AccessEcon, vol. 29(3), pages 1687-1694.
    10. Etienne Billette de Villemeur & Laurent Flochel & Bruno Versaevel, 2009. "Optimal Collusion with Limited Severity Constraint," Post-Print halshs-00375798, HAL.
    11. Christian Schultz, 2002. "Transparency and Tacit Collusion in a Differentiated Market," CESifo Working Paper Series 730, CESifo.
    12. David Collie, 2004. "Collusion and the elasticity of demand," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-6.
    13. Lambertini, Luca & Schultz, Christian, 2003. "Price or quantity in tacit collusion?," Economics Letters, Elsevier, vol. 78(1), pages 131-137, January.
    14. Timothy Sorenson, 1999. "Product Location with Foresight," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(3), pages 281-292, May.
    15. Rothschild, R., 1995. "Sustaining collusion when the choice of strategic variable is endogenous," Journal of Economic Behavior & Organization, Elsevier, vol. 28(3), pages 373-385, December.
    16. David R. Collie, 2006. "Collusion in Differentiated Duopolies with Quadratic Costs," Bulletin of Economic Research, Wiley Blackwell, vol. 58(2), pages 151-159, April.
    17. Stefano Colombo, 2009. "The unidirectional Hotelling model with spatial price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 3031-3040.
    18. Roberto Cellini & Luca Lambertini, 2004. "Private And Social Incentives Towards Investment In Product Differentiation," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 6(04), pages 493-508.
    19. Etro, Federico, 2016. "Research in economics and industrial organization," Research in Economics, Elsevier, vol. 70(4), pages 511-517.
    20. Posada, Pedro, "undated". "Leadership Cartels in Industries with Differentiated Products," Economic Research Papers 269361, University of Warwick - Department of Economics.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:wp1091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dipartimento Scienze Economiche, Universita' di Bologna (email available below). General contact details of provider: https://edirc.repec.org/data/sebolit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.