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Internal and External Cartel Stability: Numerical Solutions
Mälardalen University, School of Business, Society and Engineering, Industrial Economics and Organisation.ORCID iD: 0000-0002-1545-3956
(English)In: Computational Economics, ISSN 0927-7099, E-ISSN 1572-9974Article in journal (Refereed) Epub ahead of print
Abstract [en]

The size of imperfect cartels has been investigated by some researchers since early 1980s. Most papers have proposed various conditions to find the optimal number of cartel firms., while other researchers have conducted numerical simulations to determine the size of stable cartels. In this paper, I investigate two standard models, with additional parameters in demand and cost functions. In the first model the cartel faces j competitive firms, while in the second model the cartel is the Stackelberg leader and the j-firms are Cournot followers. In the second model, the entry to and exit from cartel are formulated as integer no-linear programming, using some parameter bounds. Contrary to other studies who relied on simplified demand and cost functions and found exact algebraic conditions, Mathematica fails to provide such conditions. It does provide though global numerical solutions. In the first model, irrespectively of the number of firms, the optimal number of k-firms is always three. In the second model, the number of k-firms is moderate higher, but lower than other studies found.

Keywords [en]
Cartel and Fringe firms; Internal and External Stability; Global Optimum
National Category
Economics and Business
Research subject
Industrial Economics and Organisations
Identifiers
URN: urn:nbn:se:mdh:diva-39128DOI: 10.1007/s10614-018-9818-5OAI: oai:DiVA.org:mdh-39128DiVA, id: diva2:1203801
Available from: 2018-05-04 Created: 2018-05-04 Last updated: 2018-05-08Bibliographically approved

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Papahristodoulou, Christos

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CiteExportLink to record
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