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Market Segmentation, Market Integration, and Tacit Collusion

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Author Info
Constantin Colonescu (American University in Bulgaria, Blagoergrad)
Nicolas Schmitt (Simon Fraser University, Burnaby, BC, Canada)

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Abstract

Moving from market segmentation to market integration (firms cannot discriminate among markets) is shown to have often anticompetitive effects in an infinitely repeated Cournot game. In particular, market integration between two countries leads both of them to experience anticompetitive effects when product markets are similar. The same conclusion holds when trade liberalization is modeled as a decrease in bilateral trade barriers followed by moving from market segmentation to market integration. The analysis also predicts that a less efficient country (like a country in transition) enjoys pro--competitive effects from market integration. Copyright Blackwell Publishing Ltd. 2003

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Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 11 (2003)
Issue (Month): 1 (February)
Pages: 175-192
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Handle: RePEc:bla:reviec:v:11:y:2003:i:1:p:175-192

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  1. Constantinos Syropoulos & Eric Bond, 2003. "Is the Tariff the ‘Mother of Trusts’? Reciprocal Trade Liberalization with Multimarket Collusion," Working Papers 0310, Florida International University, Department of Economics. [Downloadable!]
  2. Sinn, Hans-Werner, 1999. "Inflation and Welfare: Comment on Robert Lucas," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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