IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Covert networks and antitrust policy

  • Roldan, Flavia


    (IESE Business School)

Registered author(s):

    This paper studies the effectiveness of two different antitrust policies by characterizing the network structure of market-sharing agreements that arises under those settings. Market-sharing agreements prevent firms from entering each other's market. The set of these agreements defines a collusive network, which is pursued by antitrust authorities. This article shows that under a constant probability of inspection and a penalty equal to a firm's limited liability, firms form collusive alliances where all of them are interconnected. In contrast, when the antitrust policy reacts to prices in both dimensions - probability of inspection and penalty - firms form collusive cartels where they are not necessarily fully interconnected. This implies that more competitive structures can be sustained in the second case than in the first case. Notwithstanding, antitrust laws may have a pro-competitive effect in both scenarios, as they give firms in large alliances more incentives to cut their agreements at once.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by IESE Business School in its series IESE Research Papers with number D/932.

    in new window

    Length: 41 pages
    Date of creation: 07 Jul 2011
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0932
    Contact details of provider: Postal:
    IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN

    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Antoni Calvó-Armengol & Yves Zenou, 2004. "Social Networks And Crime Decisions: The Role Of Social Structure In Facilitating Delinquent Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 939-958, 08.
    2. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
    3. Matthew O. Jackson, 2001. "Strongly Stable Networks," University of Oregon Economics Department Working Papers 2001-3, University of Oregon Economics Department, revised 15 Nov 2002.
    4. Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June.
    5. Paul Belleflamme & Francis Bloch, 2004. "Market sharing agreements and collusive networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 387-411, 05.
    6. Chantale LaCasse, 1995. "Bid Rigging and the Threat of Government Prosecution," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 398-417, Autumn.
    7. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
    8. Joseph E. Harrington, Jr., 2003. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Computing in Economics and Finance 2003 26, Society for Computational Economics.
    9. Michele Polo, . "The Optimal Prudential Deterrence of Price Fixing Agreements," Working Papers 120, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    10. Zhijun Chen & Patrick Rey, 2013. "On the Design of Leniency Programs," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 917 - 957.
    11. Motta, Massimo & Polo, Michele, 2000. "Leniency Programs and Cartel Prosecution," CEPR Discussion Papers 2349, C.E.P.R. Discussion Papers.
    12. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2006. "Who's Who in Networks. Wanted: The Key Player," Econometrica, Econometric Society, vol. 74(5), pages 1403-1417, 09.
    13. Besanko, David & Spulber, Daniel F, 1989. "Antitrust Enforcement under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 99(396), pages 408-25, June.
    14. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
    15. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, November.
    16. Goyal, S. & Joshi, S., 2000. "Networks of Collaboration in Oligopoly," Econometric Institute Research Papers EI 9952-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    17. Dutta, Bhaskar & Mutuswami, Suresh, 1996. "Stable Networks," Working Papers 971, California Institute of Technology, Division of the Humanities and Social Sciences.
    18. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, November.
    19. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
    20. 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.
    21. 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.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0932. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noelia Romero)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.