Stable Commitment in an Intertemporal Collusive Trade
This study presents a more general collusive mechanism that is sustainable in an oligopolistic repeated game. In this setup, firms can obtain average payoffs beyond the cooperative profits while at the same time improve consumer welfare through a lower market price offer. In particular, we introduce here the notion of intertemporal collusive trade where each oligopolist, apart from regularly producing the normal cooperative output, is also allowed in a systematic way to earn higher than the rest at some stages of the game. This admits subgame- perfection and is shown under some conditions to be Pareto-superior to the typical cooperative outcome.
|Date of creation:||Feb 2013|
|Publication status:||Published as UPSE Discussion Paper No. DP 2013-01, February 2013|
|Contact details of provider:|| Postal: Diliman, Quezon City 1101|
Web page: http://www.econ.upd.edu.ph/
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- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation-proof equilibrium: Reply," Journal of Economic Theory, Elsevier, vol. 49(2), pages 376-378, December.
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- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-554, May.
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