International Cartels and Spheres of Influence

Aditya Bhattacharjea

in Dimensions of Economic Theory and Policy

Published in print October 2011 | ISBN: 9780198073970
Published online September 2012 | e-ISBN: 9780199081615 | DOI:
International Cartels and Spheres of Influence

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This chapter describes and extends a simple model which shows how cartels consisting of firms based in more than one country may find it profitable to allocate territorial markets amongst their members. Under certain conditions, it is incentive-compatible for firms to divide up national markets, a strategy that prevents them from competing with each other. Examples of actual cartel arrangements are provided, going back over 100 years, to show that the broad features of the model are applicable to the real world. Mixed duopoly is one where there is one public sector firm and one private sector firm. The private firm aims to maximize profits while the public firm aims to maximize total welfare. Numerous studies have explored both price and quantity competition in such a mixed duopoly. Surprisingly, however, few have addressed the nature of equilibrium in price competition in a homogeneous product mixed duopoly.

Keywords: cartels; territorial markets; mixed duopoly; profits; welfare; price competition; equilibrium; firms

Chapter.  5977 words. 

Subjects: Microeconomics

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