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Covert networks and the antitrust policy

Author

Listed:
  • Flavia Roldán

    (Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Economía / University of Navarra. IESE Business School. Public-Private Sector Research Center)

Abstract
This article studies the effectiveness of two different antitrust policies by characterizing the network structure of market-sharing agreements that arises under those settings. Market-sharing 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 under a constant probability of inspection and a penalty equal to firm’s limited liability, firms form collusive alliances where all of them are interconnected. In contrast, when the antitrust policy reacts to prices in both, probability of inspection and penalty, firms form collusive cartels where they are not necessarily fully interconnected. This implies that more competitive structures can be sustained in the second case than in the first case. Notwithstanding, antitrust laws may have a pro-competitive effect in both scenarios, as they give firms in large alliances more incentives to cut their agreements at once.

Suggested Citation

  • Flavia Roldán, 2012. "Covert networks and the antitrust policy," Documentos de Investigación 79, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    • Handle: RePEc:avs:wpaper:79
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    References listed on IDEAS

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    More about this item

    Keywords

    market-sharing; economic networks; antitrust authority; oligopoly.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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