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In typical practices of estimating cartel damages, an outcome variable such as winning bid price is regressed on a cartel dummy variable and multiple control variables. When the number of bidders in a bid is influenced by collusion, two approaches can be employed. One approach is to exclude the bidder number variable in the regression analysis. The other approach is to use predicted numbers of bidders for the collusive bids obtained, based on the observed relationship in the non-collusive bids. We show that these two approaches are equivalent in estimating the effects of collusion.

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We study the effects of subsidies on agents competing with each other. Examples include R&D competition of firms, local governments’ expenditure to stimulate local markets, and election campaigns for political parties. We find that subsidies reduce social welfare and are not always beneficial for beneficiaries.

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Using the export rivalry model based exclusive dealer channel, we examine the endogenous determination of firms' vertical structure when optimal import tariffs are implemented by the importing country. In addition, we analyze the welfare effects of trade liberalization when firms’ vertical structures are endogenous. We show that, despite being heterogeneous firms, a symmetric vertical structure appears between firms under discriminatory tariffs, but an asymmetric vertical structure under uniform tariffs, with only one firm choosing vertical separation. Moving toward free trade is not always beneficial to all exporters. For the exporting country of low-quality products, the transition from discriminatory tariffs to free trade can be rather detrimental, depending on the equilibrium vertical structure in the discriminatory tariffs and the quality gap between products.