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Optimal timing of defections from price-setting cartels in volatile markets

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  • Hassan, Shakill

Abstract

We model cartel defection in markets with stochastic demand fluctuations as an investment timing problem. We show that (i) the optimal timing of cartel defection is pro-cyclical, suggesting higher probability of competitive pricing during booms; and (ii) the defection trigger is a positive function of demand variability, and larger than its deterministic demand counterpart, implying […]
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  • Hassan, Shakill, 2006. "Optimal timing of defections from price-setting cartels in volatile markets," Economic Modelling, Elsevier, vol. 23(5), pages 792-804, September.
    • Handle: RePEc:eee:ecmode:v:23:y:2006:i:5:p:792-804
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    Cited by:

    1. Wong, Kit Pong, 2011. "Progressive taxation and the intensity and timing of investment," Economic Modelling, Elsevier, vol. 28(1-2), pages 100-108, January.
    2. Wong, Kit Pong, 2008. "Does market demand volatility facilitate collusion?," Economic Modelling, Elsevier, vol. 25(4), pages 696-703, July.
    3. Wong, Kit Pong, 2011. "Progressive taxation and the intensity and timing of investment," Economic Modelling, Elsevier, vol. 28(1), pages 100-108.
    4. Wong, Kit Pong, 2010. "The effects of irreversibility on the timing and intensity of lumpy investment," Economic Modelling, Elsevier, vol. 27(1), pages 97-102, January.
    5. Michèle Breton & Mohammed Kharbach, 2015. "Collusion and demand volatility," Economics Bulletin, AccessEcon, vol. 35(1), pages 241-246.

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