Cartel Stability and the Curvature of Market Demand

Luca Lambertini ()

Bulletin of Economic Research, 1996, vol. 48, issue 4, 329-34

Abstract: The stability of collusion is analysed for a family of demand functions whose curvature is determined by a parameter varying between zero and infinity. When the number of firms is low, firms may prefer to act as quantity setters in order to increase cartel stability if demand is sufficiently convex. Otherwise, price-setting behaviour enhances their ability to collude. As the number of firms tends to infinity, Cournot behaviour is preferable to Bertrand behaviour in order to stabilize collusion, independently of the characteristics of market demand. Copyright 1996 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1996
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Working Paper: Cartel Stability and the Curvature of Market Demand (1994)
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