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Trade Fragmentation, International Cartels, and Welfare: How Does Domestic Market Structure Matter?

Author

Listed:
  • Delina E. Agnosteva
  • Constantinos Syropoulos
  • Yoto V. Yotov

Abstract

We characterize collusive pricing in an international cartel spanning two host countries and pooling incentive constraints across markets, under general demand restricted only by a mild curvature condition that admits constant elasticity. Under domestic monopoly, fragmentation can weaken collusion and raise host welfare, whereas richer profit opportunities abroad strengthen collusion and may lower it; hosts prefer moderate barriers to either free trade or complete separation. Under domestic competition both results reverse. Whether fragmentation disciplines cartels thus depends on market structure in their home countries. Since collusion requires no trade between members, prices rather than trade flows carry the identifying information.

Suggested Citation

  • Delina E. Agnosteva & Constantinos Syropoulos & Yoto V. Yotov, 2026. "Trade Fragmentation, International Cartels, and Welfare: How Does Domestic Market Structure Matter?," CESifo Working Paper Series 12949, CESifo.
    • Handle: RePEc:ces:ceswps:_12949
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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