Abuse of forward contracts to semi-collude in volatile markets

Markus Aichele

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: I model the optimal semi-collusive strategy of firms using forward contracts in volatile markets. It has been shown that forward contracts can be used to stabilize a collusive agreement under deterministic (Liski and Montero, 2006) as well as under stochastic market conditions (Aichele, 2012). However, forward trading has a negative effect on the expected profit for collusive firms, since firms have the obligation to fulfill their forward contracts in booms as well as in recessions. Thus, in recessions firms involuntarily sell more than the optimal collusive amount. This profit decreasing effect of forward trading is in contrast to the existing literature, since under certainty forward trading does not alter the collusive profit.

JEL-codes: D43 K21 L13 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/79755/1/VfS_2013_pid_149.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79755

Access Statistics for this paper

More papers in VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().