Multi‐Market Collusion with Demand Linkages and Antitrust Enforcement
Jay Pil Choi
Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)
Heiko A. Gerlach
University of Queensland - School of Economics
The Journal of Industrial Economics, Vol. 61, Issue 4, pp. 987-1022, 2013
This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand‐related markets. We show that cartel prosecution can have a knock‐on effect: bringing down a cartel in one market reduces profits and cartel stability and leads to the break‐up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We discuss the impact of dynamic cartel formation on consumer surplus, explore antitrust spillovers, the optimal scope of antitrust interventions and cartel formation with local firms.
Number of Pages in PDF File: 36
Date posted: December 31, 2013
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