Competitive Prices as Profit-Maximizing Cartel Prices
- Publisher: Tinbergen Instituut (TI)
Repeated game | Antitrust enforcement, Cartel, Oligopoly, Repeated game | L4 | Antitrust enforcement | Oligopoly | Rechtsdurchsetzung | C7 | Oligopol | Kartellrecht | Cartel | Wiederholte Spiele | Antitrust enforcement; Cartel; Oligopoly; Repeated game | Theorie
jel: jel:L4 | jel:C7
This discussion paper has resulted in a publication in <I>Economics Letters</I>, 114, 39-42.<P> Even under antitrust enforcement, firms may still form a cartel in an infinitely-repeated oligopoly model when the discount factor is sufficiently close to one. We present a linear oligopoly model where the profit-maximizing cartel price converges to the competitive equilibrium price as the discount factor goes to one. We then identify a set of necessary conditions for this seemingly counter-intuitive result.