CARTEL STABILITY AND THE CURVATURE OF MARKET DEMAND*

Luca Lambertini,

Luca Lambertini

Dipartimento di Scienze Economiche, Università degli Studi di Bologna; and Linacre College, Oxford

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Luca Lambertini,

Luca Lambertini

Dipartimento di Scienze Economiche, Università degli Studi di Bologna; and Linacre College, Oxford

Search for more papers by this author

First published: October 1996

https://doi.org/10.1111/j.1467-8586.1996.tb00639.x

Citations: 8

I wish to thank Guido Candela, Vincenzo Denicolò, Claudia Scarani, Dario Sermasi, Martin Slater, John Vickers and two anonymous referees for insightful discussion and suggestions on an earlier draft. The usual disclaimer applies.

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ABSTRACT

The stability of collusion is analysed for a family of demand functions whose curvature is determined by a parameter varying between zero and infinity. When the number of firms is low, firms may prefer to act as quantity setters in order to increase cartel stability if demand is sufficiently convex. Otherwise, price-setting behaviour enhances their ability to collude. As the number of firms tends to infinity, Cournot behaviour is preferable to Bertrand behaviour in order to stabilize collusion, independently of the characteristics of market demand.

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Volume48, Issue4

October 1996

Pages 329-335

CARTEL STABILITY AND THE CURVATURE OF MARKET DEMAND*

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CARTEL STABILITY AND THE CURVATURE OF MARKET DEMAND*

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