Friday, May 14, 2010
Posted by D. Daniel Sokol
Flavia Roldan, Public-Private Sector Research Center, IESE Business discusses Collusive Networks in Market-Sharing Agreements Under the Presence of an Antitrust Authority.
ABSTRACT: This article studies how the presence of an antitrust authority affects market-sharing agreements made by firms. These agreements prevent firms from entering each other's market. The set of these agreements defines a collusive network, which is pursued by antitrust authorities. This article shows that while in the absence of the antitrust authority, a network is stable if its alliances are large enough when considering the antitrust authority, and more competitive structures can be sustained through bilateral agreements. Antitrust laws may have a pro-competitive effect, as they give firms in large alliances more incentives to cut their agreements at once.