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Localized Competition, Multimarket Operation, and Collusive Behavior

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  • Verboven, Frank

Abstract

This paper studies collusive behavior in a repeated oligopoly with localized competition. Private information about the rivals' past actions naturally arises from this market structure. The resulting communication problems imply that firms should adopt strategies with sufficiently lenient punishments. Infinite grim punishments are too severe for large discount factors. The standard stick-and-carrot punishments from the perfect public information model are too severe for all discount factors. Modified stick-and-carrot punishments can be used, although for a smaller range of discount factors than the standard stick-and-carrot punishments under public information. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 39 (1998)
Issue (Month): 2 (May)
Pages: 371-98

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Handle: RePEc:ier:iecrev:v:39:y:1998:i:2:p:371-98

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References

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  1. van Witteloostuijn, Arjen & van Wegberg, Marc, 1992. "Multimarket competition : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 273-282, July.
  2. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  3. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
  4. Evans, William N & Kessides, Ioannis N, 1994. "Living by the "Golden Rule": Multimarket Contact in the U.S. Airline Industry," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 341-66, May.
  5. Fudenberg, D. & Levine, D.K., 1989. "An Approximative Folk Theorem With Imperfect Private Information," Working papers 525, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Witteloostuijn, A. van & Wegberg, M.J.A.M., 1992. "Multimarket competition: Theory and evidence," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5373408, Tilburg University.
  7. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  9. Schmalensee, Richard, 1987. "Competitive advantage and collusive optima," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 351-367.
  10. Michihiro Kandori & Hitoshi Matsushima, 1997. "Private observation and Communication and Collusion," Levine's Working Paper Archive 1256, David K. Levine.
  11. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
  12. Anderson, Simon P & de Palma, Andre & Thisse, Jacques-Francois, 1989. "Demand for Differentiated Products, Discrete Choice Models, and the Characteristics Approach," Review of Economic Studies, Wiley Blackwell, vol. 56(1), pages 21-35, January.
  13. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
  14. Tom Ross, 1990. "Cartel Stability And Product Differentiation," Carleton Industrial Organization Research Unit (CIORU) 90-04, Carleton University, Department of Economics.
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Cited by:
  1. Eicher, Theo & Kang, Jong Woo, 2005. "Trade, foreign direct investment or acquisition: Optimal entry modes for multinationals," Journal of Development Economics, Elsevier, vol. 77(1), pages 207-228, June.
  2. Shimizu, Daisuke, 2002. "Product differentiation in spatial Cournot markets," Economics Letters, Elsevier, vol. 76(3), pages 317-322, August.
  3. J. Hinloopen, 2003. "Cartel Stability with Time-dependent Detection Probabilities," Tinbergen Institute Discussion Papers 03-104/1, Tinbergen Institute.

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