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International Cartels with Territorial Allocation: A Model with Paradoxical Implications

Author

Listed:
  • BHATTACHARJEA, ADITYA

    (Department of Economics, Delhi School of Economics)

  • SINHA, UDAY BHANU

    (Department of Economics, Delhi School of Economics)

Abstract

In this paper, we model collusion based on territorial allocation of markets between price-setting oligopolists in a standard supergame framework. We show that a reduction in trade costs or an increase in the number of firms can paradoxically increase the sustainability of collusion. We discuss several implications for trade and antitrust policy in this context. In particular, reduction of barriers to trade and domestic entry can reduce welfare, and some welfare-increasing mergers may be wrongly disallowed.

Suggested Citation

  • Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2016. "International Cartels with Territorial Allocation: A Model with Paradoxical Implications," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 51(1), pages 181-195.
    • Handle: RePEc:dse:indecr:0117
    as

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    More about this item

    Keywords

    Multimarket Contact; Trade Costs; Trade Liberalization; International Cartels; Antitrust.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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