Journal of Economics

, Volume 96, Issue 2, pp 137–147 | Cite as

A note on cartel stability and endogenous sequencing with tacit collusion

Article
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Abstract

We use the concept of cartel stability defined by d’Aspremont et al. (Can J Econ 16(1):17–25, 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 

JEL Classification

L11 L41 D43 
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Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.Departamento Economia AplicadaUniversitat de les Illes BalearsPalma de Mallorca BalearesSpain

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