Subgame consistent dormant-firm cartels

David W. K. Yeung

Research output: Chapter in book/report/conference proceedingChapterpeer-review

3 Citations (Scopus)


Subgame consistency is a fundamental element in the solution of cooperative stochastic differential games. In particular, it ensures that the extension of the solution policy to a later starting time and any possible state brought about by prior optimal behavior of the players would remain optimal. Hence no players will have incentive to deviate from the initial plan. Recently a general mechanism for the derivation of payoff distribution procedures of subgame consistent solutions in stochastic cooperative differential games has been found. In this paper, we consider a duopoly in which the firms agree to form a cartel. In particular, one firm has absolute and marginal cost advantage over the other forcing one of the firms to become a dormant firm. A subgame consistent solution based on the Nash bargaining axioms is derived.
Original languageEnglish
Title of host publicationDynamic Games
Subtitle of host publicationTheory and Applications
EditorsAlain Haurie, Georges Zaccour
PublisherSpringer Boston
Number of pages17
ISBN (Electronic)9780387246024
ISBN (Print)9780387246017
Publication statusPublished - 2005
Externally publishedYes


Dive into the research topics of 'Subgame consistent dormant-firm cartels'. Together they form a unique fingerprint.

Cite this