Open borders imply systems competition. This paper studies the implications of systems competition for the national competition rules. It is shown that an equilibrium where all countries retain their antitrust laws does not exist, since abolishing this law makes it possible for a single country to establish a cartel that successfully appropriates foreign business profits. Instead of such an equilibrium, a deregulation race is likely to emerge in which all but the last country repeal their antitrust laws. The deregulation race results in a chain of Stackelberg leadership positions taken over by national cartels that renders lower profits and higher consumer rents than would have been the case with harmonization of the antitrust laws.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
7273.
Length: Date of creation: Jul 1999 Date of revision: Handle: RePEc:nbr:nberwo:7273
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Find related papers by JEL classification: H7 - Public Economics - - State and Local Government; Intergovernmental Relations D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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