On the Difficulty of Collusion in the Presence of a More Efficient Outsider

Guillaume Cheikbossian and Philippe Mahenc

Journal of Institutional and Theoretical Economics (JITE), 2018, vol. 174, issue 4, 595-628

Abstract: We study the ability of several identical firms to collude in the presence of a more efficient firm, which does not take part in their collusive agreement. The cartel firms adopt stick-and-carrot strategies, while the efficient firm plays its one-period best-response function, regardless of the history of play. We characterize the most collusive symmetric punishment, which maximizes the scope for collusion. We then find that either a lower cost disadvantage or a smaller cartel size facilitates collusion. Finally, we compare our results with those obtained in the standard setup where all firms participate in the collusive agreement.

Keywords: repeated game; tacit collusion; optimal punishments; cost asymmetry; outsider (search for similar items in EconPapers)
JEL-codes: C73 D43 L13 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mohrsiebeck.com/en/article/on-the-diff ... 45617x15120238641839 (text/html)
Fulltext access is included for subscribers to the printed version.

Related works:
Working Paper: On the difficulty of collusion in the presence of a more efficient outsider (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mhr:jinste:urn:sici:0932-4569(201812)174:4_595:otdoci_2.0.tx_2-t

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

DOI: 10.1628/093245617X15120238641839

Access Statistics for this article

Journal of Institutional and Theoretical Economics (JITE) is currently edited by Gerd Mühlheußer and Bayer, Ralph-C

More articles in Journal of Institutional and Theoretical Economics (JITE) from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().