Endogenous cartel formation with heterogeneous firms

Abstract

In the context of an infinitely repeated capacity-constrained price game, we endogenize the composition of a cartel when firms are heterogeneous in their capacities. When firms are sufficiently patient, there exists a stable cartel involving the largest firms. A firm with sufficiently small capacity is not a member of any stable cartel. When a cartel is not all-inclusive, colluding firms set a price that serves as an umbrella with non-cartel members pricing below it and producing at capacity. Contrary to previous work, our results suggest that the most severe coordinated effects may come from mergers involving moderate-sized firms, rather than the largest or smallest firms. Copyright (c) 2010, RAND.

Participation games and international environmental agreements: A non-parametric model

“…Kohler (2002) uses the definition of stability to study cooperation in monetary policy. Escrihuela-Villar (2009) and Bos & Harrington Jr (2010) use the same definition of stability in a setting where the post-participation outcome is a non-cooperative equilibrium to a repeated game, rather than the result of optimization by the coalition. Bloch & Dutta (2008) explain the relation between the particular definition of coalition stability used in these papers, and other prominent definitions.…”

Imperfect collusion in an asymmetric duopoly

“…In other words, we consider a profit-sharing rule where firms' profits are to some extent proportional to capital stocks. Bos and Harrington (2010) and the references cited therein provide abundant motivation about this rule often referred to as a proportional rule.…”

Empirical methods in the analysis of collusion

“…3 From the group of all generated industries, I pick one that gives (i) a stable cartel with price wars and (ii) whose price-overcharge takes a realistic value of 17.72% (see Table 1). The simulated goods are relatively homogeneous with a maximum price-difference between the cheapest and the In the selected, infinitely lived industry T = 100 periods can be observed.…”