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Market Segmentation, Market Integration and Tacit Collusion

Author

Listed:
  • Constantin Colonescu
  • Nicolas Schmitt

Abstract

This paper shows that moving from market segmentation to market integration (i.e. firms can no longer discriminate among markets) may have anti-competitive effects in a repeated game setting in which a simple trigger strategy is the enforcement strategy. In particular, we show that two countries can never both experience pro-competitive gains and that two similar countries always both experience anti-competitive effects from market integration. We show that the same conclusions hold when trade liberalization is understood as being a decrease in bilateral barriers to trade followed by the switch from market segmentation to market integration.

Suggested Citation

  • Constantin Colonescu & Nicolas Schmitt, 1998. "Market Segmentation, Market Integration and Tacit Collusion," CESifo Working Paper Series 166, CESifo.
    • Handle: RePEc:ces:ceswps:_166
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    File URL: https://www.cesifo.org/DocDL/ces_wp166.pdf
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    Cited by:

    1. Marta Ferreira Dias & Silvia F. Jorge, 2017. "Market power and integrated regional markets of electricity: a simulation of the MIBEL," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 6(2), pages 45-67, November.
    2. Andreas Freitag & Catherine Roux & Christian Thöni, 2021. "Communication And Market Sharing: An Experiment On The Exchange Of Soft And Hard Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 175-198, February.
    3. Akinbosoye, Osayi & Bond, Eric W. & Syropoulos, Constantinos, 2012. "On the stability of multimarket collusion in price-setting supergames," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 253-264.
    4. Roux, Catherine & Santos-Pinto, Luís & Thöni, Christian, 2016. "Home bias in multimarket Cournot games," European Economic Review, Elsevier, vol. 89(C), pages 361-371.

    More about this item

    Keywords

    International Trade; Trade Policy; Imperfect Competition; Collusion; Trade Liberalization;
    All these keywords.

    JEL classification:

    • 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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