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Coalitional Approaches to Collusive Agreements in Oligopoly Games

  • Sergio Currarini


    (Department of Economics,Faculty of Economics, Università degli Studi di Venezia "Ca' Foscari")

  • Marco Marini


    (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo" and CREI, Università di Roma III)

In this paper we review a number of coalitional solution concepts for the analysis of the stability of cartels and mergers under oligopoly. We show that, although so far the industrial organization and the cooperative game-theoretic literature have proceeded somehow independently on this topic, the two approaches are highly inter-connected. We first consider the basic problem of the stability of the whole industry association of firms under oligopoly and, for this purpose, we introduce the concept of core in games with externalities. We show that different assumptions on the behaviour as well as on the timing of the coalitions of firms yield very di¤erent results on the set of allocations which are core-stable. We then consider the stability of associations of firms organized in coalition structures different from the grand coalition. To this end, various coalition formation games recently introduced by the so called endogenous coalition formation literature are critically reviewed. Again, di¤erent assumptions concerning the timing and the behaviout of firms are shown to yield a wide range of different results.

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Paper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 1113.

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Length: 21 pages
Date of creation: 2011
Date of revision: 2011
Handle: RePEc:urb:wpaper:11_13
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