Stability of Cartels in Multimarket Cournot Oligopolies

Subhadip Chakrabarti; Robert P. Gilles; Emiliya Lazarova

doi:10.1111/manc.12349

Stability of Cartels in Multimarket Cournot Oligopolies

Subhadip Chakrabarti^*, Robert P. Gilles, Emiliya Lazarova

^*Corresponding author for this work

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Abstract

We investigate the stability of cooperation agreements, such as those agreed by cartels, among firms in a Cournot model of oligopolistic competition embedded in a multimarket contact setting. Our analysis considers a broad array of 64 potential market structural configurations under linear demand and quadratic production costs. We establish that for an appropriate range of parameter values there exists a unique core stable market configuration in which an identical two‐firm cartel is sustained in both markets. Our result highlights the significance of multimarket presence for cartel formation in light of the well‐known result from the single‐market setting where cartels are non‐profitable.

Original language	English
Number of pages	16
Journal	Manchester School
Early online date	20 Sep 2020
DOIs	https://doi.org/10.1111/manc.12349
Publication status	Early online date - 20 Sep 2020

Keywords

Cournot competition
merger paradox
multimarket oligopolies

ASJC Scopus subject areas

Economics and Econometrics

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10.1111/manc.12349Licence: CC BY

Stability of cartels in Multimarket Cournot oligopolies
Copyright 2020 the authors. This is an open access article published under a Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium, provided the author and source are cited.
Final published version, 554 KBLicence: CC BY

Subhadip Chakrabarti
- s.chakrabartiqub.acuk
- Queen's Management School - Lecturer
- Economics
Person: Academic

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AB - We investigate the stability of cooperation agreements, such as those agreed by cartels, among firms in a Cournot model of oligopolistic competition embedded in a multimarket contact setting. Our analysis considers a broad array of 64 potential market structural configurations under linear demand and quadratic production costs. We establish that for an appropriate range of parameter values there exists a unique core stable market configuration in which an identical two‐firm cartel is sustained in both markets. Our result highlights the significance of multimarket presence for cartel formation in light of the well‐known result from the single‐market setting where cartels are non‐profitable.

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Stability of Cartels in Multimarket Cournot Oligopolies

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Keywords

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Subhadip Chakrabarti

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