Costs of Maintaining a Cartel

Steven G Lanning

Journal of Industrial Economics, 1987, vol. 36, issue 2, 147-74

Abstract: The costs of operating a cartel are determined by the effort spent on policing member firms and errors in detection of cheaters. An output review is modeled that may be used with tr igger pricing. In the presence of a Wiener process to describe distur bances in demand, the cartel uses trigger pricing first and then swit ches to an output review. Costs generated by cartel maintenance affec t social welfare and provide a foundation for analyzing the impact of a cartel on society. Copyright 1987 by Blackwell Publishing Ltd.

Date: 1987
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