- Illinois Walls in alternative market structures
- CeNDEF working paper
- Number of pages
- University of Amsterdam
- Document type
- Working paper
- Interfacultary Research Institutes
Faculty of Economics and Business (FEB)
- Amsterdam Center for Law & Economics (ACLE)
Amsterdam Business School Research Institute (ABS-RI)
Amsterdam School of Economics Research Institute (ASE-RI)
This note extends on our paper Illinois Walls: How Barring Indirect Purchaser Suits Facilitates Collusion (Schinkel, Tuinstra and Rüggeberg, 2005, henceforth STR). It presents analyses of two alternative, more competitive, market structures to conclude that when the conditions for existence of Illinois Walls derived in STR are satisfied, Illinois Walls also exist in these alternative market structures. Section 1 considers a market in which each downstream firm is able to buy and sell several varieties of the differentiated product, which increases competition at the downstream level. It is found that Illinois Walls then exist for discount factors that are always strictly smaller than the critical discount value found in STR. Section 2 studies the case where all wholesalers produce one and the same homogeneous input, which the downstream firms each differentiate into their own variety. In this market structure, competition is strong at the upstream level. Illinois Walls turn out to exist for any positive value of the discount factor. These findings suggest that Illinois Walls are robust to variations in market structure.
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