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The size of stable cartels: An analytical approach

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  • Zu, Lei
  • Zhang, Jin
  • Wang, Shouyang

Abstract

In this paper, we revisit the size of stable cartels in a symmetric oligopoly model with a Cournot fringe. Konishi and Lin (1999) make a conjecture on the size of stable cartels. Due to algebra complexity, they test the conjecture by conducting numerical simulations. We provide an analytical approach to determine the size of stable cartels, and show that the size of stable cartels is slightly larger than the one in their conjecture. Furthermore, we find that the uniqueness of the stable cartel in Konishi and Lin (1999) could not always hold.

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  • Zu, Lei & Zhang, Jin & Wang, Shouyang, 2012. "The size of stable cartels: An analytical approach," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 217-222.
    • Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:217-222
    DOI: 10.1016/j.ijindorg.2011.09.003
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    1. Effrosyni Diamantoudi & Eftichios S. Sartzetakis, 2006. "Stable International Environmental Agreements: An Analytical Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(2), pages 247-263, May.
    2. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    3. Prokop, Jacek, 1999. "Process of dominant-cartel formation," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 241-257, February.
    4. Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-327, June.
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    Cited by:

    1. Ludwig Auer & Tu Anh Pham, 2023. "Imperfect collusion in monitored markets with free entry," Journal of Economics, Springer, vol. 140(3), pages 181-207, December.
    2. Jean J. Gabszewicz & Skerdilajda Zanaj, 2015. "(Un)stable vertical collusive agreements," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(3), pages 924-939, August.
    3. Aymeric Lardon, 2019. "On the coalitional stability of monopoly power in differentiated Bertrand and Cournot oligopolies," Theory and Decision, Springer, vol. 87(4), pages 421-449, November.
    4. Takeda, Kohei & Hosoe, Toyoki & Watanabe, Takayuki & Matsubayashi, Nobuo, 2018. "Stability analysis of horizontal mergers in a market with asymmetric substitutability," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 73-84.
    5. von Auer, Ludwig & Pham, Tu Anh, 2020. "Optimal Destabilization of Cartels," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224521, Verein für Socialpolitik / German Economic Association.
    6. Ludwig Auer & Tu Anh Pham, 2021. "Optimal destabilization of cartels," Journal of Regulatory Economics, Springer, vol. 59(2), pages 175-192, April.
    7. Ludwig von Auer & Tu Anh Pham, 2023. "Imperfect Collusion On Surveilled Markets With Free Entry," Research Papers in Economics 2023-05, University of Trier, Department of Economics.
    8. Ludwig von Auer & Tu Anh Pham, 2019. "Optimal Destabilization of Cartels," Research Papers in Economics 2019-07, University of Trier, Department of Economics.
    9. Subhadip Chakrabarti & Robert P. Gilles & Emiliya Lazarova, 2021. "Stability of cartels in Multimarket Cournot oligopolies," Manchester School, University of Manchester, vol. 89(1), pages 70-85, January.
    10. Odenkirchen, Johannes, 2017. "Pricing Behavior of Cartel Outsiders in Incomplete Cartels," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168309, Verein für Socialpolitik / German Economic Association.
    11. Christos Papahristodoulou, 2019. "Internal and External Cartel Stability: Numerical Solutions," Computational Economics, Springer;Society for Computational Economics, vol. 53(4), pages 1451-1465, April.

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    More about this item

    Keywords

    Cartel stability; Uniqueness; Oligopoly; Cournot fringe;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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