Cartel formation with endogenous capacity and demand uncertainty

Arbeitspapier

This article analyzes the strategic decisions of firms whether to establish and adhere to a cartel when they can also shape competition by investing into production capacity while being subject to unexpected demand shocks with persistence. The model shows that a negative demand shock can facilitate cartel formation despite lowering collusive profits. This is because lower demand reduces capacity utilization and makes competition more intense especially when capacities are durable and when demand falls much within a short time. The model also shows that firms with a low discount rate strive for a dominant position in the market which results in asymmetric capacity distributions. These obstruct collusive strategies. This is interesting because a low discount rate is usually considered a facilitating factor for collusion.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 43-2013

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Firm Behavior: Theory ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices
• Thema: Asymmetric firms ; capacity investments ; cartel formation ; demand shocks ; excess capacity

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Paha, Johannes
• Ereignis: Veröffentlichung
• (wer): Philipps-University Marburg, Faculty of Business Administration and Economics
• (wo): Marburg
• (wann): 2013

Weitere Informationen

• Handle: http://hdl.handle.net/10419/93498
• Letzte Aktualisierung: 10.03.2025, 11:41 MEZ