Does cartel leadership facilitate collusion?

Marc Escrihuela-Villar (marc.escrihuela@uib.es)

No 39, DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada

Abstract: We discuss the implications of a Stackelberg sequence of play between a cartel and the fringe. We consider two different approaches to collusion: (i) one-stage static model and (ii) a multi-period oligopoly model. Our main result is that in the static model with quantity-setting firms a stable cartel only exist when cartel firms behave as a Stackelberg leader. It is also shown that in the supergame approach the cartel is always more easily sustained with the leadership than in the simultaneous-moves game. The opposite result is obtained in a price-setting supergame with differentiated products.

Keywords: Collusion; Leadership; Stability; Sustainability (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 L41 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ubi:deawps:39

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