Illegal Cartel

54 Pages Posted: 20 Apr 2020

See all articles by Douglas Silveira

Douglas Silveira

University of Alberta - Department of Economics

Emilson Delfino Silva

University of Alberta - Department of Marketing, Business Economics & Law

Silvinha Vasconcelos

Universidade Federal de Juiz de Fora - Department of Economics

Date Written: March 24, 2020

Abstract

This paper offers a theoretical model for the analysis of illegal cartels. Given the nature of the cartel, retaliation is also illegal. To assess the stability of collusion as a criminal organization, we propose a one-shot game based on Bertrand competition with product differentiation. We confirm our conjectures on both the cartel's internal and external stability through numerical solutions. Depending on market parameters, the cartel remains stable with up to six homogeneous firms. By introducing cost asymmetry that number is significantly higher, and the collusion proves to be increasing in the share of high-cost firms in the market.

Keywords: Criminal behavior, deviation and retaliation, cartel stability, illegal activity

JEL Classification: C72, D21, D43, K21, L13

Suggested Citation

Silveira, Douglas and Delfino Silva, Emilson and Vasconcelos, Silvinha, Illegal Cartel (March 24, 2020). Available at SSRN: https://ssrn.com/abstract=3561919 or http://dx.doi.org/10.2139/ssrn.3561919

Douglas Silveira (Contact Author)

University of Alberta - Department of Economics ( email )

Edmonton, Alberta T6G 2R6
Canada

Emilson Delfino Silva

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

Silvinha Vasconcelos

Universidade Federal de Juiz de Fora - Department of Economics

Juiz de Fora, Minas Gerais
Brazil

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