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Stability of cartels in Multimarket Cournot oligopolies
Author(s) -
Chakrabarti Subhadip,
Gilles Robert P.,
Lazarova Emiliya
Publication year - 2021
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/manc.12349
Subject(s) - cartel , cournot competition , oligopoly , economics , collusion , microeconomics , core (optical fiber) , bertrand competition , market structure , competition (biology) , stability (learning theory) , industrial organization , ecology , materials science , machine learning , computer science , composite material , biology
We investigate the stability of cooperation agreements, such as those agreed by cartels, among firms in a Cournot model of oligopolistic competition embedded in a multimarket contact setting. Our analysis considers a broad array of 64 potential market structural configurations under linear demand and quadratic production costs. We establish that for an appropriate range of parameter values there exists a unique core stable market configuration in which an identical two‐firm cartel is sustained in both markets. Our result highlights the significance of multimarket presence for cartel formation in light of the well‐known result from the single‐market setting where cartels are non‐profitable.