Collusion and Cartels

Question 1

collusion and cartel difference

Answer 1

collusion is agreement by rival entities to coordinate actions, cartel is explicit (contractual) agreement between firms to coordinate

Question 2

What are exceptions to the prohibition of cartels in the EU?

Answer 2

improving production of goods, promoting technical or economic progress - whilst not being negative for consumers

Question 3

How to calculate collusion in the linear cournot duopoly?

Answer 3

einfach beide gewinnfunktionen addieren und ableiten- einmal nach q1, und auf q1 auflösen, und einmal nach q2 und auf q2 auflösen (q1+q2=Qm) - dann q2 in q1 einsetzen

Question 4

Collusion linear cournot duopoly IDENTICAL FIRMS, how do reaction functions look?

Answer 4

Reaktionsfunktionen sind spiegelverkehrt bei identischen Firmen!! Bei collusion nicht NC Schnittpunkt sondern Monopolmenge!

Question 5

is collusion profitable? why is it not stable?

Answer 5

YES!!! But its not stable since each firm has an incentive to deviate. at some point they’ll get back to the NC (NB) equilibrium! This instability is especially true in static models, without a second round to penalize deviations!!!

Question 6

Answer 6

D/D!! Prisoners dilemma, in a one shot game!

Question 7

Do firms always want to join the cartel?

Answer 7

NO! If iso profit lines are like in the illustration, one of the firm might not want to join the cartell (unless paid a lump sum for example)

Question 8

When is collusion more likely

Answer 8

between similar firms! - definitely need to be similar enough for it to be profitable for both

Question 9

Collusion in Bertrand Model - difference to cournot?

Answer 9

Increases price to monopoly price instead of decreasing q to monopoly q! Incentive in Bertrand is larger, because the Bertrand equilibrium without collusion is worse for profits!!