Non-Negative Quantity Constraints and the Duration of Punishment

Luca Lambertini () and D. Sasaki

No 630, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: In an oligopoly supergame, firms face an obvious technological constraint: the positivity of their production quantities. WE show that Lambson's (1987) result on "security-level punishment", that the single-period punishment makes the firm's discounted participation condition just bind, holds only in a Bertrand supergame with perfect substitutes. In general, the sustainability of collusion by means of single-period penal codes hinges critically upon the degree of supermodularity in the stage game, as well as upon the positivity constraints on prices and/or quantities.

Keywords: GAMES; OLIGOPOLIES; PENAL SANCTIONS (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1998
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Journal Article: Non‐Negative Quantity Constraints and the Duration of Punishment (2002)
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