Working Paper: NBER ID: w7273
Authors: Hanswerner Sinn
Abstract: Open borders imply systems competition. This paper studies the implications of systems competition for the national competition rules. It is shown that an equilibrium where all countries retain their antitrust laws does not exist, since abolishing this law makes it possible for a single country to establish a cartel that successfully appropriates foreign business profits. Instead of such an equilibrium, a deregulation race is likely to emerge in which all but the last country repeal their antitrust laws. The deregulation race results in a chain of Stackelberg leadership positions taken over by national cartels that renders lower profits and higher consumer rents than would have been the case with harmonization of the antitrust laws.
Keywords: competition; antitrust laws; globalization; cartels; market efficiency
JEL Codes: H7; D43; L43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| absence of a stable equilibrium where all countries maintain their antitrust laws (L49) | deregulation race (L51) |
| deregulation race (L51) | behavior of national cartels (L12) |
| deregulation race (L51) | lower profits and higher consumer rents (R21) |
| deregulation race (L51) | overall market efficiency (G14) |
| globalization (F60) | incentive structure for cartel authorities (L12) |
| globalization (F60) | pressure to relax restrictions on mergers and alliances (L43) |
| ordo liberal policies (P39) | effectiveness in closed economy (F68) |
| retreat from ordo liberal policies (P16) | rational international competitive equilibrium (D50) |