Punishment Paths and Cartel Size

7 Pages Posted: 20 Jan 2007

See all articles by Jaideep Roy

Jaideep Roy

affiliation not provided to SSRN

R. Rothschild

Lancaster University - Department of Economics

Date Written: January 5, 2007

Abstract

Using a Dominant-group-fringe model, we show that the choice of punishment path in the event that unilateral defection occurs depends upon the common discount parameter, and that when the discount parameter is given the punishment path may depend upon the size of the dominant- group. A striking result is that only for sufficiently small dominant groups in sufficiently small industries are there cases where costs affect these choices. Consequently, costs are irrelevant to the choice of punishment in industries with a large number of Â…firms.

Keywords: Dominant-group cartels; repeated games; punishment paths.

JEL Classification: D43

Suggested Citation

Roy, Jaideep and Rothschild, R., Punishment Paths and Cartel Size (January 5, 2007). Available at SSRN: https://ssrn.com/abstract=957761 or http://dx.doi.org/10.2139/ssrn.957761

Jaideep Roy

affiliation not provided to SSRN

R. Rothschild (Contact Author)

Lancaster University - Department of Economics ( email )

Bailrigg
Lancaster LA1 4YX
United Kingdom
+441524594217 (Phone)
+441524594244 (Fax)

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