Small Heterogeneous Cartels

Sabine Böckem

Journal of Institutional and Theoretical Economics (JITE), 1998, vol. 154, issue 3, 572-588

Abstract: Economic theories explaining the existence of stable cartels are still rare. The paper offers a generalization of the D'Aspremont, Jacquemin, Gabszewicz and Weymark [1983] approach of stable cartels in a static "small world" framework taking into account that suppliers may differ with respect to their cost structure. Predictions concerning the number of cartel members and the cartel structure are derived: One does always observe a small cartel. Cartel size decreases with the overall number of suppliers in the market. Changes on the demand side have an ambiguous effect on cartel size. An exogenous demand reduction can even strengthen a cartel such as OPEC.

JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 1998
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