Hidden collusion by decentralization: firm organization and antitrust policy

Abstract

International audienceThis paper develops a theory of the centralization of firms engaged in multi-market collusive agreements. A centralized organization (called the unitary or U-form) allows price coordination across several markets, whereas with decentralized (the multidivisional or M-form) firms the probability that the antitrust authority will find evidence of collusion on one market while investigating the other is lower. We show that the firm’s choice of internal structure depends to a large extent on product substitutability and the instruments used by the antitrust authority

Durable goods with secondary markets

“…Actually, the secondary markets have important effects of new goods, including price, outputs, innovations and merger (Cho & Koo, 2012;Chen, Nie, & Wang, 2015;Chen, Wen, & Luo, 2016;Chen, Nie, & Huang, 2017;Chen, Zheng, Xu, Liu, & Wang, 2018;Dargaud, and Jacques, 2015;Liberali, Gruca, & Nique, 2011;Nie, 2018;Nie, Wang, Chen, & Yang, 2018;Nie, Wang, & Yang, 2019;Mehrjoo & Pasek, 2016Nie, 2014Todeschini, Cortimiglia, Callegaro-de-Menezes, & Ghezzi, 2017;Yang, Nie, Liu, & Shen, 2018). On one hand, secondary markets may do harm to producers.…”

Slowdown Antitrust Investigations by Decentralization

“…In Choi and Gerlach (2013), …rms collude in a …rst market and subsequently in another once the …rst cartel is dissolved, if the substitutability of products is low. Dargaud and Jacques (2015) [ DJ (2015)] show that the …rm's choice of internal structure a¤ects the detection probability of a cartel inside a …rm. Particularly the probability that the antitrust authority uncovers inculpatory evidence of several infringements when investigating only a single market decreases if …rms compartmentalize collusive agreements.…”

On the social (sub)optimality of divisionalization under product differentiation

“…For a reconstruction of the debate, see Lambertini (2017). 2 However, going multidivisional may facilitate implicit collusion (Dargaud and Jacques, 2015). 3 Corchón and González-Maestre (2000) extend the analysis to the case of concave demand functions, to prove that either perfect competition or a natural oligopoly may obtain at equilibrium as the cost of divisionalization shrinks.…”