Competitive Prices as Profit-Maximizing Cartel Prices

Harold Houba, Evgenia Motchenkova and Quan Wen ()

No 10-047/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper has resulted in a publication in Economics Letters , 2012, 114, 39-42.

Even under antitrust enforcement, firms may still form a cartel in an infinitely-repeated oligopoly model when the discount factor is sufficiently close to one. We present a linear oligopoly model where the profit-maximizing cartel price converges to the competitive equilibrium price as the discount factor goes to one. We then identify a set of necessary conditions for this seemingly counter-intuitive result.

Keywords: Antitrust enforcement; Cartel; Oligopoly; Repeated game (search for similar items in EconPapers)
JEL-codes: C7 L4 (search for similar items in EconPapers)
Date: 2010-04-27
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20100047

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