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Credible collusion in multimarket oligopoly

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Author Info
Timothy L. Sorenson (Department of Economics, Albers School of Business and Economics, Seattle University, Washington, USA)
Abstract

This article refines an established explanation of how multimarket contact facilitates collusion when firms enjoy reciprocal advantages across markets: When there are reciprocal asymmetries between firms, multimarket contact allows them not only to develop spheres of influence, but also to implement attractively simple strategies that are subgame perfect and weakly renegotiation proof. Hence, collusive equilibria are supported by fully credible punishments. A significant implication is, multimarket contact involving reciprocal differences between firms may be more facilitating to their cooperative efforts than multimarket contact based on other factors. The article discusses existing empirical work as it relates to this implication. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1314
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 2 ()
Pages: 115-128
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:28:y:2007:i:2:p:115-128

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Demougin, Dominique & Fishman, Arthur, 1991. "Efficient Budget Balancing Cartel Equilibria with Imperfect Monitoring," Economic Theory, Springer, vol. 1(4), pages 373-83, October.
  2. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June. [Downloadable!] (restricted)
  3. Scott, John T, 1982. "Multimarket Contact and Economic Performance," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 368-75, August. [Downloadable!] (restricted)
  4. Meghan R. Busse, 2000. "Multimarket Contact and Price Coordination in the Cellular Telephone Industry," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 9(3), pages 287-320, 06. [Downloadable!] (restricted)
  5. Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 394, David K. Levine. [Downloadable!]
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  6. Bergin James & MacLeod W. Bentley, 1993. "Efficiency and Renegotiation in Repeated Games," Journal of Economic Theory, Elsevier, vol. 61(1), pages 42-73, October. [Downloadable!] (restricted)
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  7. Feinberg, Robert M., 1984. "Mutual forbearance as an extension of oligopoly theory," Journal of Economics and Business, Elsevier, vol. 36(2), pages 243-249, May. [Downloadable!] (restricted)
  8. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January. [Downloadable!] (restricted)
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  9. Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December. [Downloadable!] (restricted)
  10. David G. Pearce, 1987. "Renegotiation-Proof Equilibria: Collective Rationality and Intertemporal Cooperation," Cowles Foundation Discussion Papers 855, Cowles Foundation, Yale University. [Downloadable!]
  11. Spagnolo, Giancarlo, 2005. "Managerial incentives and collusive behavior," European Economic Review, Elsevier, vol. 49(6), pages 1501-1523, August. [Downloadable!] (restricted)
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  12. Matsushima, Hitoshi, 2001. "Multimarket Contact, Imperfect Monitoring, and Implicit Collusion," Journal of Economic Theory, Elsevier, vol. 98(1), pages 158-178, May. [Downloadable!] (restricted)
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  13. Evans, Robert & Maskin, Eric, 1989. "Efficient renegotiation--proof equilibria in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 361-369, December. [Downloadable!] (restricted)
  14. Joseph Farrell and Eric Maskin., 1987. "Renegotiation in Repeated Games," Economics Working Papers 8759, University of California at Berkeley.
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  15. Fernandez, Nerea & Marin, Pedro L, 1998. "Market Power and Multimarket Contact: Some Evidence from the Spanish Hotel Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 46(3), pages 301-15, September. [Downloadable!] (restricted)
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  1. Paolo Coccorese & Alfonso Pellecchia, 2009. "Multimarket Contact and Profitability in Banking: Evidence from Italy," Journal of Financial Services Research, Springer, vol. 35(3), pages 245-271, June. [Downloadable!] (restricted)
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