Optimal Destabilization of Cartels

Ludwig von Auer and Tu Anh Pham

No 2019-07, Research Papers in Economics from University of Trier, Department of Economics

Abstract: A model-based derivation of an effective antitrust policy requires an economic framework that includes three actors: a cartel, a group of competing fringe firms, and a welfare maximizing antitrust authority. In existing models of cartel behavior, at least one of these actors is always missing. By contrast, the present paper's oligopoly model includes all three actors. The cartel is the Stackelberg quantity leader and the fringe firms are in Cournot competition with respect to the residual demand. Taking into account that the antitrust policy instruments (effort, fine, and leniency program) are not costless for society, an optimal policy is derived.

Keywords: antitrust; stability; Cournot fringe; oligopoly; leniency (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:trr:wpaper:201907

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