An Anticompetitive Effect of Eliminating Transport Barriers in Network Markets

An Anticompetitive Effect of Eliminating Transport Barriers in Network Markets This paper examines the welfare effects of physically interconnecting two (network) markets that were previously separated. In each market a different set of capacity-constrained firms operate. Firms engage in a supergame and collude whenever it is rational for them to do so.We find that, under certain parametric restrictions, interconnection of the two markets reduces total welfare. The collusive horizon may extend from a single market to the overall integrated market. In such case, interconnection can be viewed as “exporting” collusion, rather than competition. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

An Anticompetitive Effect of Eliminating Transport Barriers in Network Markets

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Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-008-9198-4
Publisher site
See Article on Publisher Site

Abstract

This paper examines the welfare effects of physically interconnecting two (network) markets that were previously separated. In each market a different set of capacity-constrained firms operate. Firms engage in a supergame and collude whenever it is rational for them to do so.We find that, under certain parametric restrictions, interconnection of the two markets reduces total welfare. The collusive horizon may extend from a single market to the overall integrated market. In such case, interconnection can be viewed as “exporting” collusion, rather than competition.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 11, 2009

References

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