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Stable Commitment in an Intertemporal Collusive Trade

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  • Romeo Balanquit

    (School of Economics, University of the Philippines Diliman)

Abstract

This study presents a more general collusive mechanism that is sustainable in an oligopolistic repeated game. In this setup, firms can obtain average payoffs beyond the cooperative profits while at the same time improve consumer welfare through a lower market price offer. In particular, we introduce here the notion of intertemporal collusive trade where each oligopolist, apart from regularly producing the normal cooperative output, is also allowed in a systematic way to earn higher than the rest at some stages of the game. This admits subgame- perfection and is shown under some conditions to be Pareto-superior to the typical cooperative outcome.

Suggested Citation

  • Romeo Balanquit, 2013. "Stable Commitment in an Intertemporal Collusive Trade," UP School of Economics Discussion Papers 201301, University of the Philippines School of Economics.
    • Handle: RePEc:phs:dpaper:201301
    as

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    File URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/705
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    References listed on IDEAS

    as
    1. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(1), pages 1-12.
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    3. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    4. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation-proof equilibrium: Reply," Journal of Economic Theory, Elsevier, vol. 49(2), pages 376-378, December.
    5. Drew Fudenberg & David K. Levine, 1988. "Open and Closed-Loop Equilibria in Dynamic Games With Many Players," Levine's Working Paper Archive 221, David K. Levine.
    6. Balanquit, Romeo, 2010. "Tolerance, Cooperation, and Equilibrium Restoration in Repeated Games," MPRA Paper 21877, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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