Collusive Networks in Market Sharing Agreements in the Presence of an Antitrust Authority (Job Market Paper)

This paper studies how the presence of an antitrust authority on market sharing agreements a¤ects the agreements made by \u85rms in oligopolistic markets. Market sharing agreements prevent \u85rms from entering each others market. The set of market sharing agreements de\u85nes a collusive network which is under suspicion by antitrust authorities. The paper shows that, from the \u85rms point of view, the probability of getting caught is endogenous and depends on the agreements each \u85rm has signed. Stable collusive networks can be decomposed into a set of isolated \u85rms and complete alliances of di¤erent sizes. While in the absence of the antitrust authority a network is stable if its alliances are large enough, when the antitrust authority is considered, the networks stability depends on the network con\u85guration as a whole. Antitrust laws may have a pro-competitive e¤ect as they give \u85rms in large alliances more incentives to cut their agreements at once. JEL Classi\u85cation Numbers: D43, K21, L4