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Sustaining Collusion under Economic Integration

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  • Luca Colombo
  • Paola Labrecciosa

Abstract

In this paper, we aim at investigating from a game-theory perspective whether trade liberalization can promote a collusive two-way trade. We show that, under Cournot competition, economic integration is anti-competitive if collusive trade is a possible outcome of the repeated game; under price competition, the likelihood of collusive trade is a necessary but not sufficient condition for trade liberalization to be pro-competitive. Furthermore, we show that economic integration may increase the scope for collusion irrespective of the firms' strategic variable. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Luca Colombo & Paola Labrecciosa, 2007. "Sustaining Collusion under Economic Integration," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 905-915, November.
  • Handle: RePEc:bla:reviec:v:15:y:2007:i:5:p:905-915
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    Cited by:

    1. Kazuhiro Ohnishi, 2011. "Two-Stage Quantity-Setting Games and Tacit Collusion," Finnish Economic Papers, Finnish Economic Association, vol. 24(1), pages 64-77, Spring.
    2. Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2015. "Multi-market collusion with territorial allocation," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 42-50.
    3. Damoun Ashournia & Per Svejstrup Hansen & Jonas Worm Hansen, 2013. "Trade Liberalization and the Degree of Competition in International Duopoly," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 1048-1059, November.

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