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Market Segmentation, Market Integration, and Tacit Collusion
Author(s) -
Colonescu Constantin,
Schmitt Nicolas
Publication year - 2003
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00376
Subject(s) - tacit collusion , market segmentation , cournot competition , economics , market integration , collusion , market share analysis , segmentation , factor market , market share , industrial organization , microeconomics , international economics , market microstructure , order (exchange) , artificial intelligence , computer science , finance
Moving from market segmentation to market integration (firms cannot discriminate among markets) is shown to have often anticompetitive effects in an infinitely repeated Cournot game. In particular, market integration between two countries leads both of them to experience anticompetitive effects when product markets are similar. The same conclusion holds when trade liberalization is modeled as a decrease in bilateral trade barriers followed by moving from market segmentation to market integration. The analysis also predicts that a less efficient country (like a country in transition) enjoys pro–competitive effects from market integration.