IDEAS home Printed from https://ideas.repec.org/p/ubi/deawps/39.html
   My bibliography  Save this paper

Does cartel leadership facilitate collusion?

Author

Listed:
  • Marc Escrihuela-Villar

    (Universitat de les Illes Balears)

Abstract

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.

Suggested Citation

  • Marc Escrihuela-Villar, 2009. "Does cartel leadership facilitate collusion?," DEA Working Papers 39, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  • Handle: RePEc:ubi:deawps:39
    as

    Download full text from publisher

    File URL: http://dea.uib.es/download?filename=w39.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
    2. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    3. Rothschild, R., 1992. "On the sustainability of collusion in differentiated duopolies," Economics Letters, Elsevier, vol. 40(1), pages 33-37, September.
    4. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    5. Prokop, Jacek, 1999. "Process of dominant-cartel formation," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 241-257, February.
    6. Rothschild, R., 1999. "Cartel stability when costs are heterogeneous," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 717-734, July.
    7. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    8. 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 317-327, June.
    9. Posada, P., 2001. "Leadership Cartels in Industries with Differentiated Products," The Warwick Economics Research Paper Series (TWERPS) 590, University of Warwick, Department of Economics.
    10. Albaek, Svend & Lambertini, Luca, 1998. "Collusion in differentiated duopolies revisited," Economics Letters, Elsevier, vol. 59(3), pages 305-308, June.
    11. Posada, Pedro, 2001. "Leadership Cartels in Industries with Differentiated Products," Economic Research Papers 269361, University of Warwick - Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. António Brandão & Joana Pinho & Hélder Vasconcelos, 2014. "Asymmetric Collusion with Growing Demand," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 429-472, December.
    2. Mariana Cunha & Paula Sarmento, 2014. "Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 1-38, March.
    3. Odenkirchen, Johannes, 2017. "Pricing Behavior of Cartel Outsiders in Incomplete Cartels," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168309, Verein für Socialpolitik / German Economic Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mariana Cunha & Paula Sarmento, 2014. "Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 1-38, March.
    2. Marc Escrihuela-Villar, 2009. "A note on cartel stability and endogenous sequencing with tacit collusion," Journal of Economics, Springer, vol. 96(2), pages 137-147, March.
    3. Davide Dragone, 2007. "Should One Sell Domestic Firms to Foreign Ones? A Tale of Delegation, Acquisition and Collusion," Rivista di Politica Economica, SIPI Spa, vol. 97(3), pages 85-112, May-June.
    4. Lambertini, Luca & Trombetta, Marco, 2002. "Delegation and firms' ability to collude," Journal of Economic Behavior & Organization, Elsevier, vol. 47(4), pages 359-373, April.
    5. Posada, Pedro, 2000. "Cartel Stability and Product Di¤erentiation: How Much Do the Size of the Cartel and the Size of the Industry Matter?," Economic Research Papers 269307, University of Warwick - Department of Economics.
    6. Savorelli, Luca, 2012. "Asymmetric cross-price effects and collusion," Research in Economics, Elsevier, vol. 66(4), pages 375-382.
    7. David Collie, 2004. "Collusion and the elasticity of demand," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-6.
    8. Lambertini, Luca & Schultz, Christian, 2003. "Price or quantity in tacit collusion?," Economics Letters, Elsevier, vol. 78(1), pages 131-137, January.
    9. Baldelli, Serena & Lambertini, Luca, 2006. "Price vs quantity in a duopoly supergame with Nash punishments," Research in Economics, Elsevier, vol. 60(3), pages 121-130, September.
    10. Posada, P., 2000. "Cartel Stability and Product Differentiation: How Much Do the Size of the Cartel and the Size of the Industry Matter?," The Warwick Economics Research Paper Series (TWERPS) 556, University of Warwick, Department of Economics.
    11. Posada, Pedro, 2001. "Leadership Cartels in Industries with Differentiated Products," Economic Research Papers 269361, University of Warwick - Department of Economics.
    12. Mariana Cunha & Filipa Mota, 2020. "Coordinated Effects of Corporate Social Responsibility," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 617-641, December.
    13. Marc Escrihuela-Villar & Jorge Guillén, 2014. "On The Sustainability Of Collusion In A Differentiated Oligopoly With A Cartel And A Fringe," Bulletin of Economic Research, Wiley Blackwell, vol. 66(S1), pages 132-137, December.
    14. Lambertini, L. & Sasaki, D., 1999. "A Cost-Side Analysis on Collusive Sustainability," Department of Economics - Working Papers Series 710, The University of Melbourne.
    15. L. Lambertini, 1994. "Delegation and Cartel Stability," Working Papers 208, Dipartimento Scienze Economiche, Universita' di Bologna.
    16. Posada, P., 2001. "Leadership Cartels in Industries with Differentiated Products," The Warwick Economics Research Paper Series (TWERPS) 590, University of Warwick, Department of Economics.
    17. Luca Lambertini, 2000. "Technology and Cartel Stability under Vertical Differentiation," German Economic Review, Verein für Socialpolitik, vol. 1(4), pages 421-442, November.
    18. von Auer, Ludwig & Pham, Tu Anh, 2020. "Optimal Destabilization of Cartels," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224521, Verein für Socialpolitik / German Economic Association.
    19. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 2002. "Research joint ventures, product differentiation, and price collusion," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 829-854, June.
    20. Lambertini, Luca, 1997. "Prisoners' Dilemma in Duopoly (Super)Games," Journal of Economic Theory, Elsevier, vol. 77(1), pages 181-191, November.

    More about this item

    Keywords

    Collusion; Leadership; Stability; Sustainability;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ubi:deawps:39. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Xisco Oliver (email available below). General contact details of provider: https://edirc.repec.org/data/dauibes.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.