Journal article
Trade costs and multimarket collusion
The Rand journal of economics, v 39(4), pp 1080-1104
01 Dec 2008
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Contrary to conventional wisdom, this article argues that trade liberalization may facilitate collusion and reduce welfare. With the help of a duopoly model in which firms interact repeatedly in multiple markets, we first show that, if trade costs (i.e., tariffs/transport costs) and discount factors are not too high, efficient cartel agreements necessitate the cross-hauling of goods, as that entails lower deviation incentives. In this setting, we then demonstrate that reciprocal trade liberalization always raises total output when trade costs are within a range whose lower bound exceeds a threshold level, but may reduce total output (and thus be pro-collusive) when trade costs are below that threshold level.
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Details
- Title
- Trade costs and multimarket collusion
- Creators
- Eric W. Bond - Vanderbilt UniversityConstantinos Syropoulos - Drexel University
- Publication Details
- The Rand journal of economics, v 39(4), pp 1080-1104
- Publisher
- Wiley
- Number of pages
- 25
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000261440700009
- Scopus ID
- 2-s2.0-58149373451
- Other Identifier
- 991019169788504721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Economics