Multi-market Collusion with Territorial Allocation
AbstractThis paper develops a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce a homogenous good and sustain collusion based on territorial allocation of markets. We first show, in a more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove a new paradox where the scope for collusion may be enhanced by an increase in the number of firms. We discuss several implications for trade and antitrust policy in this context.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 217.
Length: 41 pages
Date of creation: Oct 2012
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-BEC-2012-10-20 (Business Economics)
- NEP-COM-2012-10-20 (Industrial Competition)
- NEP-IND-2012-10-20 (Industrial Organization)
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.:
- K. C. Fung, 1991. "Collusive Intra-industry Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 24(2), pages 391-404, May.
- 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.
- Stephen Davies & Matthew Olczak & Heather Coles, 2007. "Tacit Collusion, Firm Asymmetries and Numbers: Evidence from EC Merger Cases," Working Papers 07-7, Centre for Competition Policy, University of East Anglia.
- Philipp J. H. Schröder, 2007.
"Cartel Stability and Economic Integration,"
Review of International Economics,
Wiley Blackwell, vol. 15(2), pages 313-320, 05.
- Miklos-Thal, Jeanine, 2008.
"Optimal Collusion under Cost Asymmetry,"
11044, University Library of Munich, Germany.
- John Gross & William L. Holahan, 2003. "Credible Collusion in Spatially Separated Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 299-312, February.
- Bhattacharjea, Aditya, 1995. "Strategic tariffs and endogenous market structures: Trade and industrial policies under imperfect competition," Journal of Development Economics, Elsevier, vol. 47(2), pages 287-312, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sanjeev Sharma).
If references are entirely missing, you can add them using this form.