Collusions: Bertrand Solution to the “Indistinguishability Theorem” Represented by the Cournot Duopoly, and the Great Prisoner’s Dilemma

  • Dusko Josheski
  • Trajko Miceski

Abstract

Collusive agreements are the most attractive topic in the industrial economics. Tacit collusions of prices results when different fi rms set identical prices, without ever meeting to discuss prices, whereby competitors recognize that is in all their best interest to avoid price competition. Because of the prisoners dilemma it is diffi cult to maintain collusive agreements for long period even though, some successful collusive agreements (tobacco, steel, cement, electrical equipment, oil) existed for decades. Overt collusion or explicit collusion in the United States is illegal Sherman Act (Section2). Cartels tend to be unstable, MC > MR for each member cartel members have the incentive to increase output.

Downloads

Download data is not yet available.

References

Carlton and Perloff, 2005, Modern Industrial Organization, 4th Edition, Pearson, Addison Wesley.

Don E. Waldman and Elizabeth J. Jensen, (2000), Industrial Organization: Theory and Practice. Addison-Wesley, second edition.

Osborne, Martin J. & Pitchik, Carolyn, (1983). “Cartels, Profi ts, and Excess Capacity,” Working Papers 83-09, C.V. Starr Center for Applied Economics, New York University.

Osborne, Martin J. & Pitchik, Carolyn, 1986. “Price competition in a capacity-constrained duopoly,” Journal of Economic Theory, Elsevier, vol. 38(2), pages 238-260, April.

Porter & Zona, (1993), “Detection of Bid Rigging in Procurement Auctions”, Journal of Political Economy, 101, 518-538.

Slade, M.E. & Jacquemun, A., 1989. “Strategic Behavior Collusion” UBC Departmental Archives 89-05, UBC Department of Economics.

Published
2013-05-20
How to Cite
Josheski, D., & Miceski, T. (2013). Collusions: Bertrand Solution to the “Indistinguishability Theorem” Represented by the Cournot Duopoly, and the Great Prisoner’s Dilemma. Yearbook - Faculty of Economics, 3(1), pp.157-164. Retrieved from https://js.ugd.edu.mk/index.php/YFE/article/view/495

Most read articles by the same author(s)