In this chapter, the optimization by cartels that restricts outputs to enhance their joint profit is examined. In particular, we consider oligopolies in which firms agree to form a cartel to restrain output and enhance their profits. Some firms have cost disadvantages that force them to become dormant partners. In Sect. 7.1 a dynamic oligopoly in which there are cost differentials among firms is presented. Pareto optimal output path, imputation schemes, profit sharing arrangements, and time (optimal-trajectory-subgame) consistent solution are derived for a dormant firm cartel in Sect. 7.2. An illustration is shown in the following section. The case when the planning horizon becomes infinite is analyzed in Sect. 7.4, including an illustration with an explicit solution following in the subsequent section.

Original languageEnglish
Title of host publicationSUBGAME CONSISTENT ECONOMIC OPTIMIZATION: AN ADVANCED COOPERATIVE DYNAMIC GAME ANALYSIS
PublisherBirkhäuser Verlag AG
Pages177-202
Number of pages26
ISBN (Print)978-0-8176-8261-3
DOIs
StatePublished - 1 Jan 2012

Publication series

NameStatic and Dynamic Game Theory: Foundations and Applications
Number9780817682613
ISSN (Print)2363-8516
ISSN (Electronic)2363-8524

    Research areas

  • Consistent solution, Cost advantage, Efficient firm, Extraction cost, Optimal trajectory

    Scopus subject areas

  • Statistics, Probability and Uncertainty
  • Statistics and Probability
  • Applied Mathematics

ID: 36951703