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Simulation and prosecution of a cartel with endogenous cartel formation

Authors: Johannes Paha;

Simulation and prosecution of a cartel with endogenous cartel formation

Abstract

In many cases, collusive agreements are formed by asymmetric firms and include only a subset of the firms active in the cartelized industry. This paper endogenizes the process of cartel formation in a numeric simulation model where firms differ in marginal costs and production technologies. The paper models the incentive to collude in a differentiated products Bertrand-oligopoly. Cartels are the outcomes of a dynamic formation game in mixed strategies. I find that the Nash-equilibrium of this complex game can be obtained efficiently by a Differential Evolution stochastic optimization algorithm. It turns out that large firms have a higher probability to collude than small firms. Since firms' characteristics evolve over time, the simulation is used to generate data of costs, prices, output-quantities, and profits. This data forms the basis for an evaluation of empirical methods used in the detection of cartels.

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Keywords

Produktdifferenzierung, collusion, Kartell, industry simulation, C72, C51, Collusion, Cartel Detection, Cartel Formation, Differential Evolution, Heuristic Optimization, Industry Simulation, cartel detection, cartel formation, L12, Dynamisches Spiel, L13, ddc:330, differential evolution, Wettbewerbsbeschränkung, C69, Oligopol, L40, D43, heuristic optimization, Simulation, Theorie, jel: jel:D43, jel: jel:L40, jel: jel:C69, jel: jel:C72, jel: jel:C51, jel: jel:L12, jel: jel:L13

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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Average
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