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International Antitrust Enforcement and Multi-Market Contact

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  • Jay Pil Choi
  • Heiko Gerlach

Abstract

This paper analyzes international antitrust enforcement when multinational firms operate in several markets with antitrust authorities in each market. We are concerned with how the sustainability of collusion in one local market is affected by the existence of collusion in other markets when they are linked by demand relationships. The interdependence of collusion sustainability across markets leads to potential externalities in antitrust enforcement across jurisdictions. As a result, cartel prosecution can have a domino effect with the desistance of one cartel triggering the internal break-up of the cartel in the adjacent market. We further find that the equilibrium in antitrust authorities’ enforcement decisions may exhibit non-linearity due to a free-rider problem as the global economy is more integrated. We also analyze the equilibrium antitrust enforcement and compare it with the globally optimal antitrust enforcement policy.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-03/cesifo1_wp2599.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2599.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2599

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Keywords: collusion; antitrust enforcement; multi-market contact;

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References

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  1. Catherine Roux & Thomas von Ungern-Sternberg, 2007. "Leniency Programs in a Multimarket Setting: Amnesty Plus and Penalty Plus," CESifo Working Paper Series 1995, CESifo Group Munich.
  2. Motta, Massimo & Polo, Michele, 2000. "Leniency Programs and Cartel Prosecution," CEPR Discussion Papers 2349, C.E.P.R. Discussion Papers.
  3. Yassine LEFOUILI & Catherine ROUX, 2008. "Leniency Programs for Multimarket Firms: The Effect of Amnesty Plus on Cartel Formation," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 08.05, Université de Lausanne, Faculté des HEC, DEEP.
  4. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
  5. Buccirossi, Paolo & Spagnolo, Giancarlo, 2005. "Leniency Policies and Illegal Transactions," CEPR Discussion Papers 5442, C.E.P.R. Discussion Papers.
  6. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  7. Corwin D. Edwards, 1955. "Conglomerate Bigness as a Source of Power," NBER Chapters, in: Business Concentration and Price Policy, pages 331-359 National Bureau of Economic Research, Inc.
  8. Block, Michael K & Feinstein, Jonathan S, 1986. "The Spillover Effect of Antitrust Enforcement," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 122-31, February.
  9. Eric W. Bond & Constantinos Syropoulos, 2008. "Trade costs and multimarket collusion," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1080-1104.
  10. Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.
  11. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
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Citations

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Cited by:
  1. Tim Reuter, 2013. "Endogenous Cartel Organization and Antitrust Fine Discrimination," Working Paper Series of the Department of Economics, University of Konstanz 2013-09, Department of Economics, University of Konstanz.
  2. Jay Pil Choi & Heiko Gerlach, 2010. "Global Cartels, Leniency Programs and International Antitrust Cooperation," CESifo Working Paper Series 3005, CESifo Group Munich.
  3. Jay Pil Choi & Heiko Gerlach, 2009. "Multi-Market Collusion with Demand Linkages and Antitrust Enforcement," CESifo Working Paper Series 2632, CESifo Group Munich.
  4. Robert M. Feinberg, 2011. "Exports-at-Risk: the Effect of Multi-Market Contact in International Trade"," Working Papers 2011-09, American University, Department of Economics.
  5. LEFOUILI, Yassine & ROUX, Catherine, 2010. "Leniency programs for multimarket firms: The effect of Amnesty Plus on cartel formation," CORE Discussion Papers 2010021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Robert M. Feinberg & Thomas A. Husted, 2013. "Do States Free Ride In Antitrust Enforcement?," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 997-1001, 01.
  7. Feinberg, Robert M., 2013. "Multimarket contact and export entry," Economics Letters, Elsevier, vol. 121(1), pages 82-84.
  8. Martin C. Byford & Joshua S. Gans, 2014. "Collusion at the Extensive Margin," NBER Working Papers 20163, National Bureau of Economic Research, Inc.

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