Formation of a Coalition-Proof Stable Cartel

Formation of coalitions in oligopolies is modeled as a noncooperative game in which firms' strategies have a binary form (to cooperate or not). The author demonstrates a one-to-one correspondence between stable cartels defined by C. d'Aspremont et al. (1983) and the Nash equilibria of this game. Using a 'coalition-proof Nash equilibrium, ' they define the concept of a coalition-proof stable cartel and prove that there is a unique equilibrium.