Stable cartel configurations: the case of multiple cartels

Abhimanyu Khan and Ronald Peeters

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a framework to analyse stability of cartels in differentiated Cournot oligopolies when multiple cartels may exist in the market. The consideration of formation of multiple cartels is in direct contrast to the existing literature which assumes, without further justification, that at most a single cartel may be formed, and we show that this consideration has markedly different implications for cartel stability. We define a cartel configuration to be stable if: (i) a firm in a cartel does not find it more profitable to leave the cartel and operate independently, (ii) a firm that operates independently does not find it more profitable to join an existing cartel, (iii) a firm in a cartel does not find it more profitable to join another existing cartel or form a new cartel with an independent firm, and (iv) two independent firms do not find it more profitable to form a new cartel. We show that now, when multiple cartels may exist in the market, a single cartel is never stable.

Keywords: multiple cartels; stability; differentiated market. (search for similar items in EconPapers)
JEL-codes: C70 D43 L13 (search for similar items in EconPapers)
Date: 2023-06-26
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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https://mpra.ub.uni-muenchen.de/117766/1/draft20230626.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/121096/8/MPRA_paper_121096.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117766

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