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The Collusive Equilibrium in a Quantity-Setting Supergame: An Application to Taiwan’s Flour Industry

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  • Tay-Cheng Ma

Abstract

This paper examines the stability of the collusive equilibrium in Friedman’s repeated game through an empirical study of Taiwan’s flour market. We calculate the payoff streams following a deviation or adherence for each firm. The evidence shows that the specified punishment path is credible, and could sustain the collusive allocation. Copyright Springer 2005

Suggested Citation

  • Tay-Cheng Ma, 2005. "The Collusive Equilibrium in a Quantity-Setting Supergame: An Application to Taiwan’s Flour Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(2), pages 107-124, September.
    • Handle: RePEc:kap:revind:v:27:y:2005:i:2:p:107-124
    DOI: 10.1007/s11151-005-1754-6
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    References listed on IDEAS

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    1. Rees, Ray, 1993. "Collusive Equilibrium in the Great Salt Duopoly," Economic Journal, Royal Economic Society, vol. 103(419), pages 833-848, July.
    2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    3. Martin, Stephen, 1988. "The measurement of profitability and the diagnosis of market power," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 301-321.
    4. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    5. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    6. Rosenbaum, David I., 1989. "An empirical test of the effect of excess capacity in price setting, capacity-constrained supergames," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 231-241, June.
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    Cited by:

    1. Ma, Tay-Cheng, 2008. "Disadvantageous collusion and government regulation," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 168-185, January.

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    More about this item

    Keywords

    collusive equilibrium; excess capacity; repeated game; L13;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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