Formation of a coalition-proof stable cartel

Formation of coalitions in oligopolies is modelled as a non-cooperative game in which firms' strategies have a binary form (to cooperate or not). We demonstrate a one-to-one correspondence between stable cartels defined by d'Aspremont et al. (1983) and the Nash equilibria of this game. Using a 'Coalition-Proof Nash Equilibrium' (CPNE), we define the concept of a coalition-proof stable cartel and prove that there is a unique equilibrium.