The propensity to a breach the cartel in competition a la Bertrand

N. Klikunov ()

Journal of Modern Competition, 2016, vol. 10, issue 5, 47-53

Abstract: Traditional approaches to collusion involving small number of participants and the strategy of endless retaliation, predict a sufficiently low discount rate necessary for self-support of the cartel. Presented in the article model with a large number of participants and the strategies of vengeance, time-limited, shows the cartel as a relatively unstable economic institute in situation a-la Bertrand The simulation results suggest that even for the situation in the presence of a duopoly strategy «four eye for an eye» and more going situation quite similar to the strategy of endless retribution. The analysis comes to the following conclusions. 1. If the number of periods of retaliation is less than the number of participants in the cartel, the collusion strategy will always be ineffective. 2. With the same increase in the number of participants in the cartel and retaliation periods propensity to violate cartel will increase. 3. In terms of the total amount of certain factors cartel participants is more important to break the cartel in comparison with the number of periods during which the wages.Introduction to model the behavior of the factors of incomplete observability cartel participants to each other and the likelihood of reduced demand for goods and services produced by cartel members, increases the chances of opportunistic behavior.

Keywords: self-sustaining cartel; collusion; competition Bertrand; strategies of retaliation; the number of participants in the cartel; discount rate; the propensity to breach of the cartel agreement (search for similar items in EconPapers)
Date: 2016
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