In a model of repeated Cournot competition under complete information, I show how the existence of a fringe of managerial firms affects the stability of a cartel of strict profit-maximizing firms. There always exists a critical dimension of the fringe that makes the cartel unstable, and this dimension is non-monotone in the total number of firms. By appropriately selecting the dimension of the fringe, a policy maker can affect the equilibrium outcome. As an example, I consider the case of a domestic authority that is contemplating whether to allow entry of a fringe of managerial foreign firms in the domestic market to increase the competitive pressure, thereby enhancing domestic welfare.

Dragone D. (2007). Should one sell domestic firms to foreign ones? A tale of delegation, acquisition and collusion. RIVISTA DI POLITICA ECONOMICA, 5-6, 85-113.

Should one sell domestic firms to foreign ones? A tale of delegation, acquisition and collusion.

DRAGONE, DAVIDE
2007

Abstract

In a model of repeated Cournot competition under complete information, I show how the existence of a fringe of managerial firms affects the stability of a cartel of strict profit-maximizing firms. There always exists a critical dimension of the fringe that makes the cartel unstable, and this dimension is non-monotone in the total number of firms. By appropriately selecting the dimension of the fringe, a policy maker can affect the equilibrium outcome. As an example, I consider the case of a domestic authority that is contemplating whether to allow entry of a fringe of managerial foreign firms in the domestic market to increase the competitive pressure, thereby enhancing domestic welfare.
2007
Dragone D. (2007). Should one sell domestic firms to foreign ones? A tale of delegation, acquisition and collusion. RIVISTA DI POLITICA ECONOMICA, 5-6, 85-113.
Dragone D.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/109356
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