A note on cartel stability and endogenous sequencing with tacit collusion

Marc Escrihuela-Villar ()

No 29, DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada

Abstract: We use the concept of cartel stability defined by d'Aspremont et al. (1983) to obtain that the sequence of play between the cartel and the fringe affects cartel stability in a quantity-competition setting where firms tacitly collude. We also prove that an endogenous sequence of play between a cartel and a fringe depends on the discount factor. If the discount factor is large enough, the cartel and the fringe simultaneously choose quantities since the stable cartel may contain more firms under simultaneous play than under cartel leadership. This is due to the fact that under simultaneous play cartel firms have incentives to participate in the cartel because otherwise no collusion is possible.

Keywords: Collusion; Cartel stability; Stackelberg leadership (search for similar items in EconPapers)
JEL-codes: D43 L11 L41 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Journal Article: A note on cartel stability and endogenous sequencing with tacit collusion (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ubi:deawps:29

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