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 multimarket 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 profits 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 suboptimal under global welfare. With multiple industries, both countries can be better off under integration or signing an international antitrust agreement.