Abstract
The purpose of this paper is to refute the genrally accepted idea that a cartel raises producers' surplus at the expense of consumers' surplus. If firms in an industry expect that a cartel in which the output is allocated on the bases of the capital equipment will be formed, then each firm tries to make a larger capital investment than before, which may lead to larger consumers' surplus. Through this argument, I shall present one of the reasons why heavy industries had excess capacity in postwar Japan.
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