Multimarket Linkages, Cartel Discipline and Trade Costs

94 Pages Posted: 27 Feb 2018

See all articles by Delina Agnosteva

Delina Agnosteva

Towson University

Constantinos Syropoulos

LeBow College of Business, Drexel University

Yoto Yotov

Drexel University - Department of Economics & International Business

Date Written: January 23, 2018

Abstract

We build a model of tacit collusion between firms that operate in multiple markets to study the effects of trade costs. A key feature of the model is that cartel discipline is endogenous. Thus, markets that appear segmented are strategically linked via the incentive compatibility constraint. Importantly, trade costs affect cartel shipments and welfare not only directly but also indirectly through discipline. Using extensive data on international cartels, we find that trade costs exert a negative and significant effect on cartel discipline. In turn, cartel discipline has a negative and significant impact on trade flows, in line with the model.

Keywords: endogenous cartel discipline, competitiveness, multimarket contact, welfare, trade flows, trade costs, trade policy, gravity

JEL Classification: D430, F100, F120, F130, F150, F420, L120, L130, L410

Suggested Citation

Agnosteva, Delina and Syropoulos, Constantinos and Yotov, Yoto, Multimarket Linkages, Cartel Discipline and Trade Costs (January 23, 2018). CESifo Working Paper Series No. 6829. Available at SSRN: https://ssrn.com/abstract=3129981

Delina Agnosteva

Towson University ( email )

8000 York Road, ST 100A
Towson, MD 21204
United States

HOME PAGE: http://www.pages.drexel.edu/~dea34/

Constantinos Syropoulos

LeBow College of Business, Drexel University ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States
215-895-2792 (Phone)
215-895-6975 (Fax)

HOME PAGE: http://faculty.lebow.drexel.edu/SyropoulosC/

Yoto Yotov (Contact Author)

Drexel University - Department of Economics & International Business ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States

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