Collusion sustainability with a capacity constrained firm

Leonardo Madio () and Aldo Pignataro ()
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Leonardo Madio: University of Padova
Aldo Pignataro: Italian Regulatory Authority for Energy, Networks and Environment

No 295, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We study an infinitely repeated oligopoly game in which firms compete on quantity and one of them is capacity constrained. We show that collusion sustainability is non-monotonic in the size of the capacity constrained firm, which has little incentive to deviate from a cartel. We also present conditions for the emergence of a partial cartel, with the capacity constrained firm being excluded by the large firms or self-excluded. In the latter case, we show under which circumstances the small firm induces a partial conspiracy that is Pareto-dominant. Implications for cartel identification and enforcement are finally discussed.

Keywords: Antitrust; capacity constraints; collusion; partial cartel. (search for similar items in EconPapers)
Pages: 50 pages
Date: 2022-12
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0295

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