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Stable Commitment in an Intertemporal Collusive Trade

  • Romeo Balanquit

    (School of Economics, University of the Philippines Diliman)

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    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.

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    File URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/705
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    Paper provided by University of the Philippines School of Economics in its series UP School of Economics Discussion Papers with number 201301.

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    Length: 34 pages
    Date of creation: Feb 2013
    Date of revision:
    Publication status: Published as UPSE Discussion Paper No. DP 2013-01, February 2013
    Handle: RePEc:phs:dpaper:201301
    Contact details of provider: Postal: Diliman, Quezon City 1101
    Phone: 927-9686
    Web page: http://www.econ.upd.edu.ph/

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