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(Un)stable vertical collusive agreements

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  • GABSZEWICZ, Jean

    () (Université catholique de Louvain, CORE, Belgium)

  • ZANAJ, Skerdilajda

    () (CREA, Université du Luxembourg)

  • ,

Abstract

In this paper, we extend the concept of stability to vertical collusive agreements, involving downstream and upstream firms, using a setup of successive Cournot oligopolies. We show that a stable vertical agreement always exists: the unanimous vertical agreement involving all downstream and upstream firms. Thus, stable vertical collusive agreements exist even for market structures in which horizontal cartels would be unstable. We also show that there are economies for which the unanimous agreement is not the only stable one. Furthermore, Stigler statement according to which the only ones who benefit from a collusive agreement are the outsiders need not be valid in vertical agreements.

Suggested Citation

  • GABSZEWICZ, Jean & ZANAJ, Skerdilajda & ,, 2013. "(Un)stable vertical collusive agreements," CORE Discussion Papers 2013053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2013053
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    References listed on IDEAS

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    1. Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, January.
    2. Jean J. Gabszewicz & Skerdilajda Zanaj, 2011. "Free entry in successive oligopolies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 7(2), pages 179-188, June.
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    4. Jean J. Gabszewicz & Skerdilajda Zanaj, 2015. "(Un)stable vertical collusive agreements," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 924-939, August.
    5. Jacques Drèze & Alain Durré & Jacques Drèze & Jean-François Carpantier, 2014. "Fiscal Integration and Growth Stimulation in Europe," Recherches économiques de Louvain, De Boeck Université, vol. 80(2), pages 5-45.
    6. George J. Stigler, 1950. "The Development of Utility Theory. II," Journal of Political Economy, University of Chicago Press, vol. 58, pages 373-373.
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    8. Nigar Hashimzade & Jean Hindriks & Gareth D. Myles, 2006. "Solutions Manual to Accompany Intermediate Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582694, January.
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    Citations

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    Cited by:

    1. VARDAR, N. Baris, 2013. "Imperfect resource substitution and optimal transition to clean technologies," CORE Discussion Papers 2013072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. François Maniquet & Massimo Morelli, 2015. "Approval quorums dominate participation quorums," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(1), pages 1-27, June.
    3. Jean J. Gabszewicz & Skerdilajda Zanaj, 2015. "(Un)stable vertical collusive agreements," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 924-939, August.
    4. Cristina Pardo-Garcia & Jose Sempere-Monerris, 2015. "Equilibrium mergers in a composite good industry with efficiencies," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(1), pages 101-127, March.
    5. Paul Belleflamme & Paul Bloch, 2013. "Dynamic Protection of Innovations through Patents and Trade Secrets," CESifo Working Paper Series 4486, CESifo Group Munich.
    6. RUSSO, Federica & MOUCHART, Michel & WUNSCH, Guillaume, 2013. "Confounding and control in a multivariate system. An issue in causal attribution," CORE Discussion Papers 2013068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. DI SUMMA, Marco, 2013. "The convex hull of the all-different system with the inclusion property: a simple proof," CORE Discussion Papers 2013069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Keywords

    collusion; stability; vertical agreement;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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