Efficient budget balancing cartel equilibria with imperfect monitoring

Dominique Demougin, Arthur Fishman

Research output: Contribution to journalArticlepeer-review

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We modify the infinitely repeated Cournot game with imperfect monitoring of Green and Porter (1984) and Abreu, Pearce and Stacchetti (1986) to include heterogenous products and the possibility of balanced budget side payments (Holmström 1982). It is shown that a transfer mechanism which induces the efficient outcome exists under a reasonable technical assumption in contrast to the preceding authors. Intuitively, the existence of an observable random price vector rather than a single price makes it possible to identify "likely" defectors, eliminating the need for collective punishments.

Original languageEnglish
Pages (from-to)373-383
Number of pages11
JournalEconomic Theory
Issue number4
StatePublished - Dec 1991
Externally publishedYes


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