Aditya Bhattacharjea & Uday Bhanu Sinha – Delhi School of Economics
Centre for Development Economics
and
Department of Economics, Delhi School of Economics
ANNOUNCE A SEMINAR
Multi-market Collusion with Territorial Allocation: Three Paradoxes
by
Aditya Bhattacharjea
&
Uday Bhanu Sinha
Delhi School of Economics
Thursday, September 13, 2012 at 3:00 p.m.
Venue : AMEX Conference Room (Second Floor)
Department of Economics, Delhi School of Economics
All are cordially invited
Abstract
This paper develops a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce homogenous goods and sustain collusion based on territorial allocation of markets. We first show, in a more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove two new paradoxes: the scope for collusion can be enhanced by harmonization of countries’ tariff rates, and by an increase in the number of firms. We discuss several implications for trade and antitrust policy in this context.