Skip to main content
Article
Internal cartel stability with time-dependent detection probabilities
International Journal of Industrial Organization (2006)
  • Jeroen Hinloopen
Abstract
To account for the illegal nature of price-fixing agreements, per-period detection probabilities that can vary over time are introduced in a dynamic oligopoly. The resulting ICCs for internal cartel stability indicate that for discount factors up to 10% per-period detection probabilities of 5% are needed to reduce the number of cartel members by 50%. For the special case of stationary supergames with constant per-period detection probabilities p elegant rules emerge: internal cartel stability requires the discount factor to increase with 100 × p / (1 − p) percent while a fixed fine of 100 × (1 − p) / p percent of incremental cartel profits is required for making the ICC always binding.
Keywords
  • internal cartel stability,
  • trigger strategy,
  • detection probabilities,
  • non-stationary supergames
Publication Date
2006
DOI
doi.org/10.1016/j.ijindorg.2006.04.005
Citation Information
Jeroen Hinloopen. "Internal cartel stability with time-dependent detection probabilities" International Journal of Industrial Organization Vol. 24 Iss. 6 (2006) p. 1213 - 1229
Available at: http://works.bepress.com/hinloopen/20/