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On the stability of multimarket collusion in price-setting supergames

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  • Akinbosoye, Osayi
  • Bond, Eric W.
  • Syropoulos, Constantinos

Abstract

In this paper we examine how trade liberalization affects collusive stability in the context of multimarket interactions. The model we consider is a segmented-markets duopoly with differentiated goods in which price-setting firms pool their incentive constraints across markets to sustain their most collusive outcome. We find that, when goods are very close substitutes and trade costs are sufficiently high, a marginal reduction in trade costs facilitates collusion. Exactly the opposite is true if, for any given degree of product substitutability, trade costs are sufficiently low. We also study the dependence of multimarket collusion on product differentiation.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 30 (2012)
Issue (Month): 2 ()
Pages: 253-264

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Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:253-264

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Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Multimarket cartels; Trade costs; Product differentiation;

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References

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  1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, April.
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  10. Hackner, Jonas, 1996. "Optimal symmetric punishments in a Bertrand differentiated products duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 611-630, July.
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  12. Vasconcelos, Helder, 2008. "Sustaining Collusion in Growing Markets," CEPR Discussion Papers 6865, C.E.P.R. Discussion Papers.
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  17. Tom Ross, 1990. "Cartel Stability And Product Differentiation," Carleton Industrial Organization Research Unit (CIORU) 90-04, Carleton University, Department of Economics.
  18. Eric W. Bond & Constantinos Syropoulos, 2008. "Trade costs and multimarket collusion," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1080-1104.
  19. Connor, John M. & Bolotova, Yuliya, 2006. "Cartel overcharges: Survey and meta-analysis," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1109-1137, November.
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Citations

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Cited by:
  1. Dennis Sánchez Navarro, 2013. "Eficacia y asimetrías de los programas de delación en un contexto multimercado: un análisis del caso colombiano en el marco del TLC con Estados Unidos," ESTUDIOS ECONÓMICOS SIC 010905, SUPERINTENDENCIA DE INDUSTRIA Y COMERCIO.
  2. Sánchez Navarro, Dennis, 2013. "Eficacia y asimetrías de los programas de delación en un contexto multi-mercado: un análisis del caso colombiano en el marco del TLC con Estados Unidos
    [Efficacy and asymmetries of the leniency
    ," MPRA Paper 48699, University Library of Munich, Germany.

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