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The collusion incentive constraint

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  • Huric Larsen, Jesper Fredborg

Abstract

The collusion incentive constraint is an important economic measure of cartel stability. It weighs the profits of being in a cartel with those of cheating and punishment of the remaining cartel members. The constraint places no restrictions on firm cartel, cheating and punishment pricing, but is usually considered in a restricted competitive set up characterized by either Cournot or Bertrand competition. This paper examines the constraint under Bertrand competition and homogenous goods when assuming that cartel members have the same market power and then continues to examine if this is not so.

Suggested Citation

  • Huric Larsen, Jesper Fredborg, 2014. "The collusion incentive constraint," MPRA Paper 58449, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58449
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    File URL: https://mpra.ub.uni-muenchen.de/58449/1/MPRA_paper_58449.pdf
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    References listed on IDEAS

    as
    1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, January.
    2. Valerie Y. Suslow, 2005. "Cartel contract duration: empirical evidence from inter-war international cartels," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(5), pages 705-744, October.
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    More about this item

    Keywords

    Collusion; firm incentives; market power;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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