Abstract
A dynamical model of industry equilibrium is described in which a cartel deters deviations from collusive output levels by threatening to produce at Cournot quantities for a period of fixed duration whenever the market price falls below some trigger price. In this model firms can observe only their own production level and a common market price. The market demand curve is assumed to have a stochastic component, so that an unexpectedly low price may signal either deviations from collusive output levels or a "downward" demand shock.
Original language | English (US) |
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Pages (from-to) | 313-338 |
Number of pages | 26 |
Journal | Journal of Economic Theory |
Volume | 29 |
Issue number | 2 |
DOIs | |
State | Published - Apr 1983 |
ASJC Scopus subject areas
- Economics and Econometrics