Does cartel leadership facilitate collusion?
We discuss the implications of a Stackelberg sequence of play between a cartel and the fringe. We consider two different approaches to collusion: (i) one-stage static model and (ii) a multi-period oligopoly model. Our main result is that in the static model with quantity-setting firms a stable cartel only exist when cartel firms behave as a Stackelberg leader. It is also shown that in the supergame approach the cartel is always more easily sustained with the leadership than in the simultaneous-moves game. The opposite result is obtained in a price-setting supergame with differentiated products.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: Edificio Gaspar Melchor de Jovellanos, Crta. de Valldemossa km 7,5, Palma 07122 (BALEARS)|
Web page: http://www.uib.es/depart/deaweb/
More information through EDIRC
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.:
- d'ASPREMONT, Claude & JACQUEMIN, Alexis & GABSZEWICZ, Jean J. & WEYMARK, John A., .
"On the stability of collusive price leadership,"
CORE Discussion Papers RP
522, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
- Posada, P., 2001. "Leadership Cartels in Industries with Differentiated Products," The Warwick Economics Research Paper Series (TWERPS) 590, University of Warwick, Department of Economics.
- Prokop, Jacek, 1999. "Process of dominant-cartel formation," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 241-257, February.
- Rothschild, R., 1992. "On the sustainability of collusion in differentiated duopolies," Economics Letters, Elsevier, vol. 40(1), pages 33-37, September.
- Rothschild, R., 1999. "Cartel stability when costs are heterogeneous," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 717-734, July.
- Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- Albaek, Svend & Lambertini, Luca, 1998. "Collusion in differentiated duopolies revisited," Economics Letters, Elsevier, vol. 59(3), pages 305-308, June.
- Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-27, June.
When requesting a correction, please mention this item's handle: RePEc:ubi:deawps:39. 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: (Xisco Oliver)
If references are entirely missing, you can add them using this form.