Nationalistic Bias in Collusion Prosecution : The Case for International Antitrust Agreements

We study the incentives of competition authorities to prosecute collusive practices of domestic and foreign firms in a multi-market contact model between two firms operating in two countries. In equilibrium, the country of origin of the firms might prefer to delay prosecution to protect pro ts in foreign markets. This strategic delay is valuable because prosecution in the country of origin of the firms activates an information spillover that triggers prosecution in the foreign country. Prosecution delays, however, are not optimal from the point of view of global welfare, something that could be solved by integrating the competition authorities. With multiple industries, both countries can be better off under integration or signing an international antitrust agreement