Multi‐Market Collusion with Demand Linkages and Antitrust Enforcement

36 Pages Posted: 31 Dec 2013  

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

Multiple version iconThere are 2 versions of this paper

Date Written: December 2013

Abstract

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.

Suggested Citation

Choi, Jay Pil and Gerlach, Heiko A., Multi‐Market Collusion with Demand Linkages and Antitrust Enforcement (December 2013). The Journal of Industrial Economics, Vol. 61, Issue 4, pp. 987-1022, 2013. Available at SSRN: https://ssrn.com/abstract=2373309 or http://dx.doi.org/10.1111/joie.12041

Jay Pil Choi (Contact Author)

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-353-7281 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Heiko A. Gerlach

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

Paper statistics

Downloads
1
Abstract Views
217