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Multi-Market Collusion with Demand Linkages and Antitrust Enforcement

  • Jay Pil Choi
  • Heiko Gerlach

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.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-04/cesifo1_wp2632.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2632.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2632
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  1. 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.
  2. Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion?," PIER Working Paper Archive 03-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Motta, Massimo & Polo, Michele, 2000. "Leniency Programs and Cartel Prosecution," CEPR Discussion Papers 2349, C.E.P.R. Discussion Papers.
  4. 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.
  5. Joseph E Harrington, 2001. "Optimal Cartel Pricing in the Presence of an Antitrust Authority," Economics Working Paper Archive 460, The Johns Hopkins University,Department of Economics, revised Jul 2002.
  6. Joseph E Harrington Jr, 2002. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Economics Working Paper Archive 487, The Johns Hopkins University,Department of Economics, revised May 2003.
  7. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  8. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics.
  9. Spagnolo, Giancarlo, 1999. "On Interdependent Supergames: Multimarket Contact, Concavity, and Collusion," Journal of Economic Theory, Elsevier, vol. 89(1), pages 127-139, November.
  10. 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.
  11. Jay Pil Choi & Heiko Gerlach, 2009. "International Antitrust Enforcement and Multi-Market Contact," CESifo Working Paper Series 2599, CESifo Group Munich.
  12. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
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