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A note on cartel stability and endogenous sequencing with tacit collusion

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  • Marc Escrihuela-Villar

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.
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  • Marc Escrihuela-Villar, 2009. "A note on cartel stability and endogenous sequencing with tacit collusion," Journal of Economics, Springer, vol. 96(2), pages 137-147, March.
    • Handle: RePEc:kap:jeczfn:v:96:y:2009:i:2:p:137-147
    DOI: 10.1007/s00712-008-0053-8
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    4. António Brandão & Joana Pinho & Hélder Vasconcelos, 2014. "Asymmetric Collusion with Growing Demand," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 429-472, December.
    5. Iwan Bos & Joseph E. Harrington, Jr, 2010. "Endogenous cartel formation with heterogeneous firms," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 92-117, March.
    6. 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.
    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. Darong DAI & Kunrong SHEN, 2014. "Stochastic evolutionary cartel formation," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(590)), pages 7-26, January.
    10. Mariana Cunha & Paula Sarmento, 2014. "Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 1-38, March.
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    More about this item

    Keywords

    Collusion; Cartel stability; Stackelberg leadership; L11; L41; D43;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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