Downward-sloping linear supply function equilibrium in duopoly

• DOI: 10.5267/j.jpm.2018.2.002
• Publication Date: 2018-03-19T12:31:07Z
• Authors: Keita Yamane
• Keywords: Duopoly; Supply

This study examines the properties of downward-sloping region linear supply function equilibrium (cartel case), which has not been considered in literature.In simple duopoly settings, we find two regions, depending on cartel type.Specifically, a tight cartel, fiercer competition yields higher profits to firms, but is unstable.Instead, case loose lower profits, and stable.Thus, our framework, individual firms' as stable are maximized pure rather somewhat weak cartel.This result sheds lights situations policymakers should focus while monitoring cartels.