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Localized Competition, Multimarket Operation and Collusive Behavior

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  • Verboven, F.

    (Tilburg University, Center for Economic Research)

Abstract

This paper studies collusive behavior in a repeated oligopoly model with localized competition, also reinterpreted as a model of multimarket operation. Private information about the rivals' past actions naturally arises from these product market structures. The resulting communication problems imply that firms should not adopt strategies with too severe punishments. Infinite grim punishments may be too severe, for large discount factors. The standard stick-and-carrot punishments from the perfect public information model are always too severe, for all discount factors. Modified stick-and-carrot punishments can still be used, though for a smaller range of discount factors than the standard stick-and-carrot punishments.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1995-49.

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Date of creation: 1995
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Handle: RePEc:dgr:kubcen:199549

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  1. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
  2. Tom Ross, 1990. "Cartel Stability And Product Differentiation," Carleton Industrial Organization Research Unit (CIORU) 90-04, Carleton University, Department of Economics.
  3. 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.
  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. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  6. Schmalensee, Richard, 1987. "Competitive advantage and collusive optima," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 351-367.
  7. 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.
  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. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  11. Fudenberg, Drew & Levine, David K., 1991. "An approximate folk theorem with imperfect private information," Journal of Economic Theory, Elsevier, vol. 54(1), pages 26-47, June.
  12. Michihiro Kandori & Hitoshi Matsushima, 1997. "Private observation and Communication and Collusion," Levine's Working Paper Archive 1256, David K. Levine.
  13. ANDERSON, Simon P. & de PALMA, André & THISSE, Jacques-François, . "Demand for differentiated products, discrete choice models, and the characteristics approach," CORE Discussion Papers RP -824, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. 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.
  15. 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.
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Cited by:
  1. Hinloopen, Jeroen, 2006. "Internal cartel stability with time-dependent detection probabilities," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1213-1229, November.
  2. Theo Eicher & Jong Woo Kang, 2004. "Trade, Foreign Direct Investment or Acquisition: Optimal Entry Modes for Multinationals," CESifo Working Paper Series 1174, CESifo Group Munich.
  3. J. Hinloopen, 2003. "Cartel Stability with Time-dependent Detection Probabilities," Tinbergen Institute Discussion Papers 03-104/1, Tinbergen Institute.
  4. Shimizu, Daisuke, 2002. "Product differentiation in spatial Cournot markets," Economics Letters, Elsevier, vol. 76(3), pages 317-322, August.

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