A Simple Model of Imperfect Competition in which Four are Few but Three are Not

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This paper presents a model of imperfect competition in which the likelihood of collusion is not a monotonically decreasing function of the number of firms. Other notable oligopoly models predict a monotonic relationship. The difference in predictions is a consequence of our assumptions that firms either explicitly collude or instead engage in Cournot behavior and that explicit collusion, if detected, is punished with fines and damages.