The suboptimality of optimal punishments in Cournot supergames

Colombo, Luca and Labrecciosa, Paola (2005) The suboptimality of optimal punishments in Cournot supergames. Economics Letters, 90 (1) . pp. 116-121. ISSN 0165-1765 [Article] (doi:10.1016/j.econlet.2005.07.014)

Abstract

We investigate, within a Cournot supergame, whether optimal punishments may become suboptimal when economies of scale are not negligible. We show that, for sufficiently strong increasing returns to scale, the critical discount factor associated to grim trigger strategies is lower than the one associated to optimal penal codes.

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