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International Cartels with Territorial Allocation: A Model with Paradoxical Implications

Aditya Bhattacharjea () and Uday Bhanu Sinha
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Aditya Bhattacharjea: Department of Economics, Delhi School of Economics, Postal: Department of Economics, Delhi School of Economics, University of Delhi, Delhi 110007, India.
Uday Bhanu Sinha: Department of Economics, Delhi School of Economics, Postal: Department of Economics, Delhi School of Economics, University of Delhi, Delhi 110007, India.

Indian Economic Review, 2016, vol. 51, issue 1, 181-195

Abstract: In this paper, we model collusion based on territorial allocation of markets between price-setting oligopolists in a standard supergame framework. We show that a reduction in trade costs or an increase in the number of firms can paradoxically increase the sustainability of collusion. We discuss several implications for trade and antitrust policy in this context. In particular, reduction of barriers to trade and domestic entry can reduce welfare, and some welfare-increasing mergers may be wrongly disallowed.

Keywords: Multimarket Contact; Trade Costs; Trade Liberalization; International Cartels; Antitrust. (search for similar items in EconPapers)
JEL-codes: D43 F12 F15 L41 (search for similar items in EconPapers)
Date: 2016
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