Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, August 17, 2009

Sustaining Cooperation with Joint Ventures

Posted by D. Daniel Sokol

Russell Cooper, University of Texas at Austin - Department of Economics and Thomas W. Ross, University of British Columbia describe Sustaining Cooperation with Joint Ventures.

ABSTRACT: Antitrust agencies and courts have expressed concerns that joint ventures and strategic alliances between firms that compete in other markets might serve to reduce the vigor of their competition. This article explores a mechanism through which a joint venture between two (or more) firms in one market can serve to facilitate collusion in another market-even one unconnected vertically or horizontally by costs or demand. In the models studied here, play in one market has the effect of altering players' beliefs about their rivals' play in the second market. A joint venture in one market may provide a credible punishment mechanism for firms colluding in another market. The joint venture may also provide a vehicle for the transmission, between players, of information in a way that helps cooperative types find each other and collude in other markets.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/08/sustaining-cooperation-with-joint-ventures.html

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