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Internal and External Cartel Stability: Numerical Solutions
Mälardalen University, School of Business, Society and Engineering, Industrial Economics and Organisation. (Industriell Ekonomi och Organisation)ORCID iD: 0000-0002-1545-3956
(English)Manuscript (preprint) (Other academic)
Abstract [en]

The size of stable cartels has been investigated by some researchers since early 1980s. Most papers, based on simple cost and demand functions, have proposed various conditions to find the optimal number of k-firms. Other researchers recently have conducted numerical simulations or an analytic approach to determine the size of stable cartels. In this paper I provide numerical solutions as well as dynamic graphs, with more parameters in demand and cost functions, based on two models. In the first model the cartel faces j competitive firms and in the second model the cartel is the Stackelberg leader while the j-firms are Cournot followers. In the first model, the optimal number of cartel firms is always three irrespectively of the number of firms. In the second model, the number of k-firms is moderate higher, but lower than other studies find. In addition, there is no exact algebraic condition to determine the size of stable cartels. 

Keyword [en]
cartel and fringe firms; internal and external stability; global optimum
National Category
Economics and Business
Research subject
Industrial Economics and Organisations
URN: urn:nbn:se:mdh:diva-34815OAI: diva2:1072184
Available from: 2017-02-07 Created: 2017-02-07 Last updated: 2017-02-07Bibliographically approved

Open Access in DiVA

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