Trade Fragmentation, International Cartels, and Welfare: How Does Domestic Market Structure Matter?

Delina Agnosteva, Constantinos Syropoulos () and Yoto Yotov

No 202617, Working Papers from Center for Global Policy Analysis, LeBow College of Business, Drexel University

Abstract: We characterize collusive pricing in an international cartel spanning two host countries and pooling incentive constraints across markets, under general demand restricted only by a mild curvature condition that admits constant elasticity. Under domestic monopoly, fragmentation can weaken collusion and raise host welfare, whereas richer profit opportunities abroad strengthen collusion and may lower it; hosts prefer moderate barriers to either free trade or complete separation. Under domestic competition both results reverse. Whether fragmentation disciplines cartels thus depends on market structure in their home countries. Since collusion requires no trade between members, prices rather than trade flows carry the identifying information.

Keywords: Fragmentation; Oligopoly; Multimarket interactions; Cartel discipline; Collusive pricing; Trade costs; Domestic market structure (search for similar items in EconPapers)
JEL-codes: D43 F10 F12 F13 F15 L12 L13 L41 (search for similar items in EconPapers)
Pages: 56
Date: 2026-08
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Working Paper: Trade Fragmentation, International Cartels, and Welfare: How Does Domestic Market Structure Matter? (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:drx:wpaper:202617

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