Endogenous Cartel Formation with Heterogeneous Firms

Iwan Bos and Joseph E. Harrington, Jr.

Economics Working Paper Archive from The Johns Hopkins University,Department of Economics

Abstract: In the context of an infinitely repeated capacity-constrained price game, we endogenize the composition of a cartel when .rms are heterogeneous in their capacities. When .rms are sufficiently patient, there exists a stable cartel involving the largest .rms. A .rm with sufficiently small capacity is not a member of any stable cartel. When a cartel is not all-inclusive, colluding firms set a price that serves as an umbrella with non-cartel members pricing below it and producing at capacity. Contrary to previous work, our results suggest that the most severe coordinated e��ects may come from mergers involving moderate-sized firms, rather than the largest or smallest firms.

Date: 2008-09, Revised 2008-11
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.econ2.jhu.edu/REPEC/papers/WP544.pdf (application/pdf)

Related works:
Journal Article: Endogenous cartel formation with heterogeneous firms (2010)
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:jhu:papers:544

Access Statistics for this paper

More papers in Economics Working Paper Archive from The Johns Hopkins University,Department of Economics 3400 North Charles Street Baltimore, MD 21218. Contact information at EDIRC.
Bibliographic data for series maintained by Humphrey Muturi ().