Stability of Cartels in Multimarket Cournot Oligopolies

Subhadip Chakrabarti*, Robert P. Gilles, Emiliya Lazarova

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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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 languageEnglish
Number of pages16
JournalManchester School
Early online date20 Sep 2020
DOIs
Publication statusEarly online date - 20 Sep 2020

Keywords

  • Cournot competition
  • merger paradox
  • multimarket oligopolies

ASJC Scopus subject areas

  • Economics and Econometrics

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