IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Cartel Enforcement with Uncertainty About Costs

What cartel agreements are possible when firms have private information about production costs? For private cost uncertainty we characterize the set of cartel agreements that can be supported, recognizing incentive and participation constraints. If defection results in either Cournot or Bertrand competition, the incentive problem in large cartels is severe enough to prevent the cartel from achieving the monopoly outcome. However, if the cartel agreement requires less than unanimous ratification by the member firms, then the incentive problem can be overcome in large cartels. With common cost uncertainty, perfect collusion is possible in large cartels, regardless of the ratification rule.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: Full text
Download Restriction: no

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 90ier.

in new window

Length: 31 pages
Date of creation: 1991
Date of revision: 09 Jun 1998
Publication status: Published in International Economic Review, 31:1, February 1991, pages 17-47.
Handle: RePEc:pcc:pccumd:90ier
Contact details of provider: Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 433-446.
  3. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
  4. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June.
  5. Kihlstrom, Richard & Vives, Xavier, 1992. "Collusion by Asymmetrically Informed Firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 371-96, Summer.
  6. McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
  8. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  9. J. Riley & E. Maskin, 1981. "Optimal Auctions with Risk Averse Buyers," Working papers 311, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  11. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  12. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Thomas R. Palfrey, 1985. "Uncertainty Resolution, Private Information Aggregation and the Cournot Competitive Limit," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 69-83.
  14. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. David P. Baron & David Besanko, 1984. "Regulation, Asymmetric Information, and Auditing," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 447-470, Winter.
  16. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  17. Hendricks, Kenneth & Porter, Robert H, 1988. "An Empirical Study of an Auction with Asymmetric Information," American Economic Review, American Economic Association, vol. 78(5), pages 865-83, December.
  18. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
  19. Hallagan, William S, 1985. "Contracting Problems and the Adoption of Regulatory Cartels," Economic Inquiry, Western Economic Association International, vol. 23(1), pages 37-56, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pcc:pccumd:90ier. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Cramton)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.