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Stable cartel with a cournot fringe in a symmetric oligopoly

Hideo Konishi, Ping Lin

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Abstract

We consider a symmetric cartel formation game where the cartel, once formed, acts as a Stackelberg quantity leader and the nonmember firms play the Cournot game with respect to the residual demand. We show the existence of a stable cartel under fairly general demand and cost conditions. We also compare by means of numerical examples the size of stable cartels in our model with that in the price leadership model of d'Aspremont et al.

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We consider a symmetric cartel formation game where the cartel, once formed, acts as a Stackelberg quantity leader and the nonmember firms play the Cournot game with respect to the residual demand. We show the existence of a stable cartel under fairly general demand and cost conditions. We also compare by means of numerical examples the size of stable cartels in our model with that in the price leadership model of d'Aspremont et al.

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Available abstract

We consider a symmetric cartel formation game where the cartel, once formed, acts as a Stackelberg quantity leader and the nonmember firms play the Cournot game with respect to the residual demand. We show the existence of a stable cartel under fairly general demand and cost conditions. We also compare by means of numerical examples the size of stable cartels in our model with that in the price leadership model of d'Aspremont et al.

Key concepts: Cartel, Cournot competition, Oligopoly, Collusion, Economics, Microeconomics, Mathematical economics

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