Antitrust policies in network environments

Carlos Ponce and Flavia Roldán
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Carlos Ponce: Universidad Alberto Hurtado
Flavia Roldán: Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Economía
Authors registered in the RePEc Author Service: Flavia Roldán

No 112, Documentos de Investigación from Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales

Abstract: We study the effectiveness of two different antitrust policies by characterizing the network structure of market-sharing agreements that arises under those settings. Marketsharing agreements prevent firms from entering each other’s market. The set of these agreements defines a collusive network, which is pursued by antitrust authorities. We show that under a constant probability of inspection and a penalty equal to firm’s limited liability, firms form collusive alliances where all of them are interconnected. In contrast, when the probability of inspection reacts to prices firms form collusive cartels where they are not necessarily fully interconnected. These results suggest that more competitive structures can be sustained in the second case than in the first one. 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.

Keywords: Market-sharing; networks; antitrust authority; oligopoly. (search for similar items in EconPapers)
JEL-codes: D43 K21 L41 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2016-12
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