The collusion incentive constraint

Huric Larsen, Jesper Fredborg (2014): The collusion incentive constraint.

Abstract

The collusion incentive constraint is an important economic measure of cartel stability. It weighs the profits of being in a cartel with those of cheating and punishment of the remaining cartel members. The constraint places no restrictions on firm cartel, cheating and punishment pricing, but is usually considered in a restricted competitive set up characterized by either Cournot or Bertrand competition. This paper examines the constraint under Bertrand competition and homogenous goods when assuming that cartel members have the same market power and then continues to examine if this is not so.

• Item Type: MPRA Paper
• Language: English
• Keywords: Collusion, firm incentives, market power
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C71 - Cooperative Games; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; L - Industrial Organization > L4 - Antitrust Issues and Policies

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