COLLUSIVE EQUILIBRIUM IN COURNOT OLIGOPOLIES WITH UNKNOWN COSTS

Subir K. Chakrabarti

International Economic Review, 2010, vol. 51, issue 4, 1209-1238

Abstract: The article studies collusive equilibria in an infinitely repeated Cournot oligopoly with unknown costs. I look at collusive pooled Perfect Bayesian equilibria and separating equilibria either with signaling or with communication. In the separating equilibria with signaling the firms play the strictly separating Bayesian Nash equilibrium in period 1 and produce the optimal incentive compatible collusive quantity vector from period 2 onwards. In the separating equilibrium with communication the optimal incentive compatible quantity vector is produced from period 1 onwards. Among these, the optimal separating equilibrium with communication gives the highest expected discounted joint profits.

Date: 2010
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