Oligopoly Models

Abstract

Much of modern microeconomics and industrial economics is based on

game theory. In this chapter we look at oligopolistic models where firms may cooperate

and form coalitions. Apart from R & D and export cooperations, cooperations

in industrial clusters or for standardisation, public policy opposes the formation of

cartels and trusts and fosters competition instead. Do players want merge to form

larger and larger firms? According to the cooperative models we present here, the

trade-off between efficiency gains driving mergers and the temptation to free-ride

are not trivial. We show that the monopoly does not normally form, but typically

multiple coalitions coexist.