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Sustaining Collusion in Growing Markets

  • Helder Vasconcelos

    (Universidade Católica Portuguesa and CEPR)

  • Helder Vasconcelos

    ()

    (Universidade Católica Portuguesa and CEPR)

The impact of demand growth on the collusion possibilities is investigated in a Cournot supergame where market growth may trigger future entry and the collusive agreement is enforced by the most profitable grim trigger strategies available. It is shown that even in situations where perfect collusion can be sustained after entry, coping with a potential entrant in a market which is growing over time may completely undermine any pre-entry collusive plans of the incumbent firms. This is because, before entry, a deviation and the following punishment phase may become more attractive thanks to their additional effect in terms of delaying entry.

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File Function: First version, 2008
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Paper provided by Portuguese Competition Authority in its series Working Papers with number 33.

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Date of creation: Jun 2008
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Handle: RePEc:pca:wpaper:33
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  1. Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
  2. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
  3. Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
  4. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Aubert, Cécile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," Economics Papers from University Paris Dauphine 123456789/13637, Paris Dauphine University.
  6. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  7. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  8. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  9. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
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