Abstract
AbstractWe 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.
Highlights
In their seminal work, Salant, Switzer, and Reynolds (1983) make the observation that total profits of firms are likely to be higher when they act as individual profit-maximizers than when they choose their actions jointly as part of a cooperation agreement
This led to the coining of the term merger paradox to describe this fundamental insight in the setting of Cournot competition in a single market
We focus on environments in which firms operate on multiple, strongly related markets— denoted as multimarket oligopolies
Summary
Stability of Cartels in Multimarket Cournot Oligopolies. Queen's University Belfast - Research Portal: Link to publication record in Queen's University Belfast Research Portal
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
