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Faculty of Business Administration and Economics, Philipps-Universität Marburg >
MAGKS Joint Discussion Paper Series in Economics, Universität Marburg >
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http://hdl.handle.net/10419/56581
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| Title: | | Simulation and prosecution of a cartel with endogenous cartel formation  |
| Authors: | | Paha, Johannes |
| Issue Date: | | 2010 |
| Series/Report no.: | | Joint discussion paper series in economics 07-2010 |
| Abstract: | | In many cases, collusive agreements are formed by asymmetric firms and include only a subset of the firms active in the cartelized industry. This paper endogenizes the process of cartel formation in a numeric simulation model where firms differ in marginal costs and production technologies. The paper models the incentive to collude in a differentiated products Bertrand-oligopoly. Cartels are the outcomes of a dynamic formation game in mixed strategies. I find that the Nash-equilibrium of this complex game can be obtained efficiently by a Differential Evolution stochastic optimization algorithm. It turns out that large firms have a higher probability to collude than small firms. Since firms' characteristics evolve over time, the simulation is used to generate data of costs, prices, output-quantities, and profits. This data forms the basis for an evaluation of empirical methods used in the detection of cartels. |
| Subjects: | | collusion cartel detection cartel formation differential evolution heuristic optimization industry simulation |
| JEL: | | C51 C69 C72 D43 L12 L13 L40 |
| Document Type: | | Working Paper |
| Appears in Collections: | | MAGKS Joint Discussion Paper Series in Economics, Universität Marburg
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