Common Contracts
1 similar null contracts
ENDOGENOUS CARTEL FORMATION WITH HETEROGENEOUS FIRMS AND DIFFERENTIATED PRODUCTSNovember 24th, 2010
In the Nash-equilibrium, i.e. the global minimum of Ψ, the condition j =0 applies. To see this, consider that squaring ψi does not affect the root of function Ψ but prevents that positive values of ψi for firm i and negative values of ψ−i for some firm -i sum up to zero. Taking the sum of these squared terms ensures that a proposed solution j constitutes a Nash-equilibrium for all firms. If some firm considers participation in the cartel a dominant strategy (i.e. equation (18) applies) one can pre-assign this firm a probability of j i=1 . Firms of this type need not be considered in the
