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International Antitrust Enforcement And Multimarket Contact

  • Jay Pil Choi
  • Heiko Gerlach

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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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 53 (2012)
Issue (Month): 2 (05)
Pages: 635-658

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Handle: RePEc:wly:iecrev:v:53:y:2012:i:2:p:635-658
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  1. 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.
  2. Motta, Massimo & Polo, Michele, 2000. "Leniency Programs and Cartel Prosecution," CEPR Discussion Papers 2349, C.E.P.R. Discussion Papers.
  3. Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.
  4. 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.
  5. 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.
  6. Aubert, Cécile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," Economics Papers from University Paris Dauphine 123456789/13637, Paris Dauphine University.
  7. Eric W. Bond & Constantinos Syropoulos, 2008. "Trade costs and multimarket collusion," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1080-1104.
  8. 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.
  9. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  10. Buccirossi, Paolo & Spagnolo, Giancarlo, 2005. "Leniency Policies and Illegal Transactions," CEPR Discussion Papers 5442, C.E.P.R. Discussion Papers.
  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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