Sustaining Collusion under Economic Integration*

Luca Colombo and Paola Labrecciosa

Review of International Economics, 2007, vol. 15, issue 5, 905-915

Abstract: In this paper, we aim at investigating from a game‐theory perspective whether trade liberalization can promote a collusive two‐way trade. We show that, under Cournot competition, economic integration is anti‐competitive if collusive trade is a possible outcome of the repeated game; under price competition, the likelihood of collusive trade is a necessary but not sufficient condition for trade liberalization to be pro‐competitive. Furthermore, we show that economic integration may increase the scope for collusion irrespective of the firms’ strategic variable.

Date: 2007
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https://doi.org/10.1111/j.1467-9396.2007.00664.x

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