Cartel stability when costs are heterogeneous

This paper addresses a neglected question in the literature of cartel stability and the use of trigger strategies to maintain such stability. We employ a model in which market demand is linear, and involving n firms, each operating subject to one of possibly II different cost functions. We show that the stability of the cartel may depend crucially upon the relative efficiencies of the firms, and argue that in such models explicit attention must be given to this possibility. (C) 1999 Elsevier Science B.V. All rights reserved.