Stability of cartels in Multimarket Cournot oligopolies

Subhadip Chakrabarti, Robert P. Gilles, Emiliya Lazarova

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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
Pages (from-to)70-85
Number of pages16
JournalThe Manchester School
Volume89
Issue number1
Early online date20 Sep 2020
DOIs
Publication statusPublished - Jan 2021

Keywords

  • Cournot competition
  • merger paradox
  • multimarket oligopolies

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