Abstract
This paper investigates the effect of economic integration on the ability of firms to maintain a collusive understanding about staying out of each other's markets. The paper distinguishes among different types of trade costs: ad valorem, unit, fixed. It is shown that for a suffcient reduction of ad valorem trade costs, a cartel supported by collusion on either quantities or prices will be weakened, thus integration is pro-competitive. If integration consists of a reductions in unit (fixed) trade costs a price setting cartel is strengthened (unaffected), while a quantity setting one is weakened.
| Translated title of the contribution | Cartel Stability and Economic Integration |
|---|---|
| Original language | English |
| Publication status | Published - 2004 |
Keywords
- trade liberalisation
- colussion