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Toward Improving Cartel Regulation: Market Failures and Collusion Illegality
Journal of Regulation Studies
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This study proposes reasonal criteria on cartel illegality by investigating the relationship between market failures and firms' collusive behaviors in an oligopoly with negative externalities. A collective price or/and quantity fixing in a market can be ruled as illegal per se by Korean cartel regulators. The study shows that the agreement of limiting competition can improve social welfare in cases that there is excess competition due to multiple market failures. Therefore, cartel illegality should be judged based on the effects on social welfare rather than on the characteristics of limiting competition. Though, the collective agreement of limiting competition could be judged as illegal if it is too much to attain the social optimality.
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