in 't Veld, D.

Tuinstra, J.

English

We show that incomplete cartels in quantity-setting oligopolies may increase welfare, without any effi ciencies or synergies being internalized by cartel formation. The main intuition is that the cartel has an incentive to contract output and that the firms outside the cartel react to this by expanding output. If the outsiders are more efficient than the cartel firms average production costs go down. Even for relatively moderate differences in efficiency total welfare may increase due to this market-induced rationalization

International Migration, Integration and Social Cohesion online publications

Market-induced rationalization and welfare enhancing cartels

https://pure.uva.nl/ws/files/1826631/114244_373934.pdf

Market-induced rationalization and welfare enhancing cartels

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International Migration, Integration and Social Cohesion online publications