On Globally Optimal Punishments in the Repeated Cournot Game

Flavio Delbono and Luca Lambertini ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We challenge the global optimality of one-shot punishments in infi?nitely repeated games with discounting. Speci?fically, we show that the stick-and-carrot punishment la Abreu (1986) may not be globally optimal. We prove our result by investigating tacit collusion in the infi?nite repetition of a linear Cournot game. We illustrate the existence of the stick-and-carrot globally optimal punishment for large cartels, and fully characterise it. Then, we show that for mall cartels, global optimality may be reached only with two-period punishments.

JEL-codes: C73 L13 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp1091

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