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Antitrust policies in network environments

Author

Listed:
  • Carlos Ponce

    (Universidad Alberto Hurtado)

  • Flavia Roldán

    (Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Economía)

Abstract

We study the effectiveness of two different antitrust policies by characterizing the network structure of market-sharing agreements that arises under those settings. Marketsharing agreements prevent firms from entering each other’s market. The set of these agreements defines a collusive network, which is pursued by antitrust authorities. We show that under a constant probability of inspection and a penalty equal to firm’s limited liability, firms form collusive alliances where all of them are interconnected. In contrast, when the probability of inspection reacts to prices firms form collusive cartels where they are not necessarily fully interconnected. These results suggest that more competitive structures can be sustained in the second case than in the first one. Notwithstanding, antitrust laws may have a pro-competitive effect in both scenarios, as they give firms in large alliances more incentives to cut their agreements at once.

Suggested Citation

  • Carlos Ponce & Flavia Roldán, 2016. "Antitrust policies in network environments," Documentos de Investigación 112, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
  • Handle: RePEc:avs:wpaper:112
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    References listed on IDEAS

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    More about this item

    Keywords

    Market-sharing; networks; antitrust authority; oligopoly.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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