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Cartel Stability and Economic Integration

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  • Philipp J. H. Schröder

Abstract

This paper investigates the effect of economic integration on the ability of firms to maintain a collusive understanding about staying out of each other's markets. The paper distinguishes among different types of trade costs: ad valorem, unit, fixed. It is shown that for a sufficient reduction of ad valorem trade costs, a cartel supported by collusion on either quantities or prices will be weakened, thus integration is pro-competitive. If integration consists of a reductions in unit (fixed) trade costs a price setting cartel is strengthened (unaffected), while a quantity setting one is weakened.

Suggested Citation

  • Philipp J. H. Schröder, 2004. "Cartel Stability and Economic Integration," Discussion Papers of DIW Berlin 432, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp432
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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