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Multi-Market Collusion with Demand Linkages and Antitrust Enforcement

Author

Listed:
  • Jay Pil Choi
  • Heiko Gerlach

Abstract

This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand-related markets. We show that cartel prosecution can have a knock-on effect: desisting a cartel in one market reduces profits and cartel stability and leads to the break-up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: desisting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We also consider policy implications of our analysis regarding an antitrust authority's investment decision in cartel enforcement.

Suggested Citation

  • Jay Pil Choi & Heiko Gerlach, 2009. "Multi-Market Collusion with Demand Linkages and Antitrust Enforcement," CESifo Working Paper Series 2632, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2632
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    References listed on IDEAS

    as
    1. Joseph E. Harrington, 2008. "OPTIMAL CORPORATE LENIENCY PROGRAMS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 215-246, June.
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    14. Jay Pil Choi & Heiko Gerlach, 2013. "Multi-Market Collusion with Demand Linkages and Antitrust Enforcement," Journal of Industrial Economics, Wiley Blackwell, vol. 61(4), pages 987-1022, December.
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    16. repec:dau:papers:123456789/13637 is not listed on IDEAS
    17. Jay Pil Choi & Heiko Gerlach, 2012. "International Antitrust Enforcement And Multimarket Contact," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 635-658, May.
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    More about this item

    Keywords

    cartel formation; demand linkage; antitrust enforcement;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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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