Internal cartel stability with time-dependent detection probabilitiesInternational Journal of Industrial Organization (2006)
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.
- internal cartel stability,
- trigger strategy,
- detection probabilities,
- non-stationary supergames
Citation InformationJeroen 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/