Export Cartels and Domestic Markets

This paper considers the effect of monopoly-promoting export cartels on domestic production. It is argued that export cartels facilitate tacit collusion by monitoring defections more efficiently. This slackens the incentive constraint of tacit collusion. Optimizing firms competing both in the domestic and export markets will often use the increased possibility for collusion in both markets. If the markets are not too different or there is constant returns to scale this is the case.