Imperfect collusion in monitored markets with free entry

Ludwig Auer () and Tu Anh Pham
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Ludwig Auer: Universität Trier
Tu Anh Pham: Universität Trier

Journal of Economics, 2023, vol. 140, issue 3, No 1, 207 pages

Abstract: Abstract Surveys of antitrust cases reveal that colluding firms usually (1) attempt to minimise the risk of prosecution, (2) achieve merely imperfect levels of collusion, (3) compete against some independently acting firms, and (4) adjust to market entries and exits. In contrast, existing oligopoly models neglect some of the four listed stylised facts and, thus, overlook important interdependencies between them. Therefore, the present paper develops a general quantity leadership model that simultaneously accommodates all four stylised facts. The model is a three-stage game in which each firm must make three consecutive decisions: market entry or not, collusion or not, and output quantity. The framework is augmented by an antitrust authority that ensures free market access. In addition, the antitrust authority may directly obstruct collusion and it may threaten prosecution. The results of this study indicate that the latter two instruments are rather ineffective.

Keywords: Cartel; Game; Leadership; Oligopoly; Stability; Sustainability (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:140:y:2023:i:3:d:10.1007_s00712-023-00835-w

DOI: 10.1007/s00712-023-00835-w

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