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Optimal Penal Codes in Stochastic Bertrand Games and Collusion over the Business Cycle

Author

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  • LAMBSON , Val E.

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

It is shown that optimal penal codes are security level penal codes in a general class of stochastic dynamic Bertrand games with capacity constraints. This result allows a more complete study of the behavior of collusion over the business cycle. In an illustrative linear duopoly example with very persistent demand shocks, collusive behavior is pro cyclical unless the discount factor is low and capacity constraints are loose.

Suggested Citation

  • LAMBSON , Val E., 1995. "Optimal Penal Codes in Stochastic Bertrand Games and Collusion over the Business Cycle," LIDAM Discussion Papers CORE 1995019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1995019
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1995.html
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    Cited by:

    1. Lambson, Val E., 1999. "A note on optimal penal codes in stochastic Bertrand supergames," Economics Letters, Elsevier, vol. 65(1), pages 41-46, October.

    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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