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Nationalization as Credible Threat Against Collusion

Nationalization as Credible Threat Against Collusion Within a simple model of differentiated oligopoly, we show that tacit collusion may be prevented by the threat of nationalising a private firm coupled with the appropriate choice of the weight given to private profits in the maximand of the nationalised company. This happens because the threat of nationalization eliminates the prisoners’ dilemma usually associated with a Cournot game among profit-seekers. We characterise the properties of such a threat and prove that it may allow the policy maker to credibly deter collusion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Nationalization as Credible Threat Against Collusion

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References (19)

Publisher
Springer Journals
Copyright
Copyright © 2015 by Springer Science+Business Media New York
Subject
Economics; Industrial Organization; Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-015-0211-y
Publisher site
See Article on Publisher Site

Abstract

Within a simple model of differentiated oligopoly, we show that tacit collusion may be prevented by the threat of nationalising a private firm coupled with the appropriate choice of the weight given to private profits in the maximand of the nationalised company. This happens because the threat of nationalization eliminates the prisoners’ dilemma usually associated with a Cournot game among profit-seekers. We characterise the properties of such a threat and prove that it may allow the policy maker to credibly deter collusion.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Dec 7, 2015

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