Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2010-04-27 Number: 10-047/1 Author-Name: Harold Houba Author-Workplace-Name: VU University Amsterdam Author-Name: Evgenia Motchenkova Author-Workplace-Name: VU University Amsterdam Author-Name: Quan Wen Author-Workplace-Name: Vanderbilt University Title: Competitive Prices as Profit-Maximizing Cartel Prices Abstract: This discussion paper has resulted in a publication in Economics Letters, 2012, 114, 39-42.
Even under antitrust enforcement, firms may still form a cartel in an infinitely-repeated oligopoly model when the discount factor is sufficiently close to one. We present a linear oligopoly model where the profit-maximizing cartel price converges to the competitive equilibrium price as the discount factor goes to one. We then identify a set of necessary conditions for this seemingly counter-intuitive result. Classification-JEL: L4, C7 Keywords: Antitrust enforcement, Cartel, Oligopoly, Repeated game File-Url: http://papers.tinbergen.nl/10047.pdf File-Format: application/pdf File-Size: 147234 bytes Handle: RePEc:tin:wpaper:20100047