The Stability of Cartel: Model Improvement and Reinterpretation

This paper refers to transaction cost, studying the stability of cartel and comparing it to the traditional balance scale of cartel through the perspective of a regular static model. Thus, we make 2 conclusions: Firstly, after introducing transaction cost, it´s hard to meet the requirements of cartel´s inner stability. Secondly, transaction cost reduces the profit of cartel and decreases marginal enterprises´ stimulations to join in cartel, so it greatly strengthens the external stability of cartel. The basic conclusion is that because of transaction cost, the instability of cartel results from the inner side, not the threat of marginal enterprises.