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Collusion and Durability

By Roland Strausz and Dan Sasaki

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.

Topics: Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, A1 - Allokationsmechanismen in Organisationen und Märkten, ddc:330
Year: 2008
OAI identifier: oai:epub.ub.uni-muenchen.de:13306
Provided by: Open Access LMU

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Citations

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