Collusive networks in market sharing agreements in the presence of an antitrust authority

This paper studies how the presence of an antitrust authority affects market-sharing agreements made by firms in oligopolistic markets. These agreements prevent firms from entering each other´s market. The set of market-sharing agreements defines a collusive network, which is under suspicion by antitrust authorities. This paper shows that, from the firm´s point of view, the probability of being caught is endogenous and depends on the agreements each firm has signed. Stable collusive networks can be decomposed into a set of isolated firms and complete alliances of different 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 network is stability depends on the network configuration as a whole. Antitrust laws may have a pro-competitive effect as they give Firms in large alliances more incentives to cut their agreements at once.