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CARTEL PROHIBITION MAY INCREASE PRICES *
Author(s) -
HAAN MARCO A.
Publication year - 2007
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2007.01029.x
Subject(s) - cartel , commit , economics , microeconomics , collusion , limit (mathematics) , industrial organization , monetary economics , mathematical analysis , mathematics , database , computer science
In this paper, we show that a policy that forbids cartels may benefit dominant firms, and hurt consumers. When cartels are prohibited, an incumbent monopolist can commit not to form a cartel should a new entrant enter the market. This reduces the entry threat, which implies that entry occurs less often, and the incumbent monopolist is less likely to set a limit price.