A dynamic approach to cartel formation

@article{Kuipers2008ADA,
  title={A dynamic approach to cartel formation},
  author={Jeroen Kuipers and Norma Olaizola},
  journal={International Journal of Game Theory},
  year={2008},
  volume={37},
  pages={397-408}
}
We study the endogenous formation of cartels from a dynamic point of view. First, we review some stability analyses from existing literature, which usually predict a rather small cartel as the outcome. We then study a dynamic model, in which firms can freely leave the cartel if they wish, and firms can enter the cartel if both the cartel and the firm so desire. We show that the dynamic process converges to a strongly stable cartel if one exists. Otherwise, the process does not converge, but… CONTINUE READING

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