Stability of multiple cartels in differentiated markets

Khan, Abhimanyu and Peeters, Ronald (2025): Stability of multiple cartels in differentiated markets.

Abstract

We characterize stable market structures under price-competition in differentiated markets when multiple cartels may form. Market structures without cartelisation are never stable and always involve multiple small cartels, and, but for one knife-edge case, only involves multiple small cartels. Combined with the result that the unique stable market structure under quantity-competition is also characterised by multiple small cartels, this underscores the importance of considering the possibility of multiple cartels in competition policy. Comparing stable market structures under price and quantity competition, we find that prices and profits are higher under price-competition whenever the market is sufficiently differentiated or sufficiently concentrated.

• Item Type: MPRA Paper
• Language: English
• Keywords: multiple cartels; stable cartels; price competition; differentiated markets
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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