Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 8, 1999 erstellt
Beschreibung:
The existence of a negative relationship between cartel stability and the level of excess capacity in an industry has for a long time been the dominant view in the traditional IO literature. Recent supergame-theoretic contributions (e.g. Brock and Scheinkman 1985) appear to show that this view is ill-founded. Focusing on the issue of enforcement of cartel rules ("incentive constraints"), however, this literature does not explain firms' "participation decisions". Reverting the focus of attention in a model of cartel formation, the present paper restores the traditional view: large cartels will not be sustainable in periods of high excess capacity (low demand). In contrast to the supergame-theoretic literature, it predicts a negative relationship between excess capacity and the collusive price