Collusion and Durability

Strausz, Roland and Sasaki, Dan (September 2008): Collusion and Durability. SFB/TR 15 Discussion Paper No. 246

Abstract

We develop a model to show that cartels that produce goods with lower durability are easier to sustain implicitly. This observation gen- erates the following results: 1) implicit cartels have an incentive to pro- duce goods with an inefficiently low level of durability; 2) a monopoly or explicit cartel is welfare superior to an implicit cartel; 3) welfare is non-monotonic in the number of firms; 4) a regulator may demand inefficiently high levels of durability to prevent collusion.

• Item Type: Paper
• Keywords: cartels, collusion, durability
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A1 - Allokationsmechanismen in Organisationen und Märkten
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: L15
• Language: English