Optimal cartel trigger price strategies

Robert H. Porter*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

158 Scopus citations

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 languageEnglish (US)
Pages (from-to)313-338
Number of pages26
JournalJournal of Economic Theory
Volume29
Issue number2
DOIs
StatePublished - Apr 1983

ASJC Scopus subject areas

  • Economics and Econometrics

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