Countervailing power? Collusion in markets with decentralized trade

Nadia Burani; Clara Ponsati

doi:10.1007/s10058-009-0093-8

Countervailing power? Collusion in markets with decentralized trade

Nadia Burani^*, Clara Ponsati

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

We consider the collective incentives of buyers and sellers to form cartels in markets with decentralized trade and pairwise bargaining. Cartels are coalitions of buyers or sellers that limit market participation and compensate inactive members for their abstention. In stable market outcomes, cartels set Nash equilibrium quantities and cartel memberships are immune to deviations. The set of stable market outcomes is non-empty and its full characterization is provided. Stable market outcomes are of two types: (i) at least one cartel restrains trade and market participation is balanced; (ii) only one cartel is active and it reduces trade slightly below the opponent's.

Original language	English
Pages (from-to)	91-120
Number of pages	30
Journal	Review of Economic Design
Volume	15
Issue number	2
DOIs	https://doi.org/10.1007/s10058-009-0093-8
Publication status	Published - Jun 2011

Keywords

Decentralized trade
Pairwise bargaining
Bilateral cartel formation
Cartel stability
Countervailing power
COALITION STRUCTURES
TECHNOLOGY CHOICE
STABILITY

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10.1007/s10058-009-0093-8

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title = "Countervailing power? Collusion in markets with decentralized trade",

abstract = "We consider the collective incentives of buyers and sellers to form cartels in markets with decentralized trade and pairwise bargaining. Cartels are coalitions of buyers or sellers that limit market participation and compensate inactive members for their abstention. In stable market outcomes, cartels set Nash equilibrium quantities and cartel memberships are immune to deviations. The set of stable market outcomes is non-empty and its full characterization is provided. Stable market outcomes are of two types: (i) at least one cartel restrains trade and market participation is balanced; (ii) only one cartel is active and it reduces trade slightly below the opponent's.",

keywords = "Decentralized trade, Pairwise bargaining, Bilateral cartel formation, Cartel stability, Countervailing power, COALITION STRUCTURES, TECHNOLOGY CHOICE, STABILITY",

author = "Nadia Burani and Clara Ponsati",

year = "2011",

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AU - Burani, Nadia

AU - Ponsati, Clara

PY - 2011/6

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N2 - We consider the collective incentives of buyers and sellers to form cartels in markets with decentralized trade and pairwise bargaining. Cartels are coalitions of buyers or sellers that limit market participation and compensate inactive members for their abstention. In stable market outcomes, cartels set Nash equilibrium quantities and cartel memberships are immune to deviations. The set of stable market outcomes is non-empty and its full characterization is provided. Stable market outcomes are of two types: (i) at least one cartel restrains trade and market participation is balanced; (ii) only one cartel is active and it reduces trade slightly below the opponent's.

AB - We consider the collective incentives of buyers and sellers to form cartels in markets with decentralized trade and pairwise bargaining. Cartels are coalitions of buyers or sellers that limit market participation and compensate inactive members for their abstention. In stable market outcomes, cartels set Nash equilibrium quantities and cartel memberships are immune to deviations. The set of stable market outcomes is non-empty and its full characterization is provided. Stable market outcomes are of two types: (i) at least one cartel restrains trade and market participation is balanced; (ii) only one cartel is active and it reduces trade slightly below the opponent's.

KW - Decentralized trade

KW - Pairwise bargaining

KW - Bilateral cartel formation

KW - Cartel stability

KW - Countervailing power

KW - COALITION STRUCTURES

KW - TECHNOLOGY CHOICE

KW - STABILITY

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DO - 10.1007/s10058-009-0093-8

M3 - Article

SN - 1434-4742

VL - 15

SP - 91

EP - 120

JO - Review of Economic Design

JF - Review of Economic Design

IS - 2

ER -

Countervailing power? Collusion in markets with decentralized trade

Abstract

Keywords

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