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Cartel Stability with Time-dependent Detection Probabilities

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  • J. Hinloopen

    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

To account for the illegal nature of price-fixing agreements, detection probabilities are introduced in a dynamic oligopoly. It follows that for a trigger strategy to sustain a non-cooperative collusive equilibrium as a SPNE both the discount rate and all per-period detection probabilities have to be `low enough'. Also, the domain reduces for which strictest incentive compatibility constraint is binding of the concomitant non-stationary supergame if (i) any per-period detection probability increases, (ii) prospective fine payments are increased, (iii) the period of limitation is reduced for violating antitrust laws.

Suggested Citation

  • J. Hinloopen, 2003. "Cartel Stability with Time-dependent Detection Probabilities," Tinbergen Institute Discussion Papers 03-104/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030104
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    File URL: https://papers.tinbergen.nl/03104.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cartel stability; trigger strategy; detection probabilities; period of limitation;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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