We consider an international cartel whose members interact repeatedly in their own as well as in third-country segmented markets. Cartel discipline-an inverse measure of the degree of competition between firms-is endogenously determined by the cartel’s incentive compatibility constraint (ICC),...

Constructing a two-agent model of international duopoly with increasing returns, the present paper examines potential gains from free trade. It is shown that under certain conditions, both agents in a country become worse off in free trade than in autarky with no redistribution. Further, the...