Single-Valued Control of a Cartel under Uncertainty -- A Multifirm Comparison of Prices and Quantities

Gary Yohe

Bell Journal of Economics, 1977, vol. 8, issue 1, 97-111

Abstract: Homogeneous and hybrid price and quantity controls of a cartel seeking to maximize cumulative profits are compared within an uncertain economic environment. The primary determinant of the superior control is shown to be the relative influence each choice has on the variation in total output. A member firm's size, relative to the total output, and the correlation of its output with the outputs of the other firms are therefore crucial in predicting whether the firm should optimally face a price or a quantity. Extensions of the analysis to pollution control, agricultural supports, and planned economies are also outlined.

Date: 1977
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