FARSIGHTED COALITIONAL STABILITY OF A PRICE LEADERSHIP CARTEL |
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| Authors: | YOSHIO KAMIJO SHIGEO MUTO |
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| Affiliation: | 1. Waseda University;2. An earlier version of this paper, Tokyo Institute of Technology Discussion Papers 07‐09 (2007) (available at http://www.soc.titech.ac.jp/%7Elibrary/discuss/index_e.html), was presented at the 2006 Japanese Economic Association Autumn Meeting. The authors thank Noritsugu Nakanishi for his helpful comments and suggestions at the 2006 Japanese Economic Association Autumn Meeting. We are also grateful to Yukihiko Funaki, Kazuharu Kiyono and Koichi Suga for their helpful suggestions. Thanks are also extended to the two anonymous referees for their useful comments and suggestions. The financial support from the Japanese Ministry of Education, Culture, Sports, Science and Technology under the Waseda G‐COE GLOPE II project is greatly appreciated.;3. Tokyo Institute of Technology |
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| Abstract: | This paper analyzes the farsighted behaviour of firms that form a dominant price leadership cartel. We consider stability concepts such as the farsighted core, the farsighted stable sets, and the largest consistent set. We show that: (i) the farsighted core is either an empty set or a singleton set of the grand cartel; (ii) any Pareto efficient cartel is itself a farsighted stable set; and (iii) the set of cartels in which fringe firms enjoy higher profits than the firms in the minimal Pareto efficient cartel is the largest consistent set. |
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| Keywords: | C71 D43 L13 |
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