Cartels and search
Ireland, Norman J. and Waterson, Michael (2006) Cartels and search. Working Paper. Coventey: University of Warwick, Department of Economics. Warwick economic research papers (No.770).
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This paper unifies two significant but somewhat contradictory ideas. First, search costs potentially influence market price equilibria significantly; in many equilibria consumers do not search despite above-competitive prices. Second, cartels must guard against individual members offering lower prices, thereby creating incentives for consumers to search. We develop a simple framework, and then an example, in which whether search takes place depends upon the magnitude of search costs. Three potential equilibria result, dependent upon model parameters. These include a tacit cartel agreement exhibiting price variance and volatility. A policy conclusion is that such market characteristics do not always guarantee non-cartelisation.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HF Commerce
H Social Sciences > HB Economic Theory
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Searching behavior, Cartels, Commodity control, Competition, Industrial concentration|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventey|
|Official Date:||October 2006|
|Number of Pages:||36|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
S. Albaek, P. Mollgaard, P. Overgaard, (1997), “Government assisted oligopoly coordination? A concrete case.” Journal of Industrial Economics v45, n4 (December 1997): 429-43.
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