Thursday, January 27, 2011

Strategic Delegation Improves Cartel Stability

Posted by D. Daniel Sokol

Martijn A. Han, University of Amsterdam - Amsterdam Center for Law & Economics has written on Strategic Delegation Improves Cartel Stability.

ABSTRACT: Fershtman and Judd (1987) and Sklivas (1987) show how strategic delegation in the one-shot Cournot game reduces firm profits. However, with infinitely repeated interaction, strategic delegation allows for an improvement in cartel stability compared to the infinitely repeated standard Cournot game, thereby actually increasing profits.

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