Competitive Prices as Profit-Maximizing Cartel Prices

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.

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Year of publication:	2010-04-27
Authors:	Houba, Harold ; Motchenkova, Evgenia ; Wen, Quan
Institutions:	Tinbergen Institute
Subject:	Antitrust enforcement \| Cartel \| Oligopoly \| Repeated game

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Extent:	application/pdf
Series:	Tinbergen Institute Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Tinbergen Institute Discussion Papers Number 10-047/1
Classification:	L4 - Antitrust Policy ; C7 - Game Theory and Bargaining Theory
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008838625