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Nationalization as Credible Threat Against Collusion

Flavio Delbono () and Luca Lambertini ()

Journal of Industry, Competition and Trade, 2016, vol. 16, issue 1, 127-136

Abstract: Within a simple model of differentiated oligopoly, we show that tacit collusion may be prevented by the threat of nationalising a private firm coupled with the appropriate choice of the weight given to private profits in the maximand of the nationalised company. This happens because the threat of nationalization eliminates the prisoners’ dilemma usually associated with a Cournot game among profit-seekers. We characterise the properties of such a threat and prove that it may allow the policy maker to credibly deter collusion. Copyright Springer Science+Business Media New York 2016

Keywords: Tacit collusion; Nationalization; Mixed oligopoly; L13; L32 (search for similar items in EconPapers)
Date: 2016
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