Competitive Prices as Profit-Maximizing Cartel Prices

Research, Preprint OPEN
Harold Houba ; Evgenia Motchenkova ; Quan Wen (2010)
  • Publisher: Tinbergen Instituut (TI)
  • Subject: 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
      ddc: ddc:330

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.
  • References (5)

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