On the Impact of Import Quotas on a Quantity-Fixing Cartel in a Two-Country-Setting / Der Einfluß von Importquoten auf die Stabilität eines Mengenkartells – Eine Analyse im Rahmen eines Zwei-Länder-Modells

Summary In a static supergame context, a model is presented in which a foreign and a domestic firm form a cartel for selling a homogeneous good. In order to maximize joint cartel profit, the two firms have agreed to restrict sales to their own home market. Due to transfer costs, this market split paretodominates other cartel solutions. Side payments are assumed to be feasible. The introduction of an import quota may affect cartel stability as measured by a so-called critical interest rate. The two-country setting and the feasibility of side payments lead to results very different from previous findings that mild import regulations foster cartelization whereas severe restrictions destabilize quantity-setting cartels.