Optimal Penal Codes in Stochastic Bertrand Games and Collusion over the Business Cycle

Val Lambson

No 1995019, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: It is shown that optimal penal codes are security level penal codes in a general class of stochastic dynamic Bertrand games with capacity constraints. This result allows a more complete study of the behavior of collusion over the business cycle. In an illustrative linear duopoly example with very persistent demand shocks, collusive behavior is pro cyclical unless the discount factor is low and capacity constraints are loose.

JEL-codes: C73 L13 (search for similar items in EconPapers)
Date: 1995-03-01
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