Review of Economic Design

, Volume 5, Issue 2, pp 129–147 | Cite as

Buyers' and sellers' cartels on markets with indivisible goods

  • Francis Bloch
  • Sayantan Ghosal
Original papers


This paper analyzes the formation of cartels of buyers and sellers in a simple model of trade inspired by Rubinstein and Wolinsky's (1990) bargaining model. When cartels are formed only on one side of the market, there is at most one stable cartel size. When cartels are formed sequentially on the two sides of the market, there is also at most one stable cartel configuration. Under bilateral collusion, buyers and sellers form cartels of equal sizes, and the cartels formed are smaller than under unilateral collusion. Both the buyers' and sellers' cartels choose to exclude only one trader from the market. This result suggests that there are limits to bilateral collusion, and that the threat of collusion on one side of the market does not lead to increased collusion on the other side.

JEL classification: C78, D43 
Key words: Bilateral collusion, buyers' and sellers' cartels, collusion in bargaining, countervailing power 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2000

Authors and Affiliations

  • Francis Bloch
    • 1
  • Sayantan Ghosal
    • 2
  1. 1.IRES, Department of Economics, Université Catholique de Louvain, BelgiumBE
  2. 2.Department of Economics, University of Warwick, Coventry, UKGB

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