AbstractIn its landmark ruling in Illinois Brick Co. v. Illinois, the U.S. Supreme Court restricted the right to sue for private damages from violations of section 4 of the Clayton Act to direct purchasers. Despite the fact that typically antitrust injury is, at least in part, passed on to firms lower in the production chain and ultimately to consumers, Illinois Brick has since stood as a binding legal constraint. This paper considers the strategic use that upstream firms can make of Illinois Brick to shield themselves from private damages claims. In a repeated game setting, we find that Illinois Brick may facilitate upstream firms in engaging tacitly in collusive arrangements with concealed side-payments to discourage their direct purchasers from filing suit. An example is given of such an ‘Illinois Wall’, in which downstream firms are given part of the upstream cartel profits through a symmetric rationing of their inputs at low prices. Interestingly enough, the Illinois Wall is found to be particularly stable when competition is relatively strong at both the up- and the downstream level.
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Bibliographic InfoPaper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 027.
Date of creation: 2003
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Other versions of this item:
- Schinkel, M.P. & Tuinstra, J. & Rueggeberg, J., 2004. "Illinois Walls," CeNDEF Working Papers 04-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2005. "Illinois Walls," Tinbergen Institute Discussion Papers 05-049/1, Tinbergen Institute.
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L4 - Industrial Organization - - Antitrust Issues and Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-09-08 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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