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Collusion Sustainability with Multimarket Contacts: Revisiting HHI Tests

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  • Edmond Baranes
  • Francois Mirabel
  • Jean-Christophe Poudou

Abstract

Our paper focuses on the relationship between market concentration and collusion sustainability in a framework of multimarket contacts. We consider two independent and symmetric markets in which a subset of firms are active in both markets. When firms are able to transfer market power from one market to another, firms have strong incentives to collude even in a highly competitive market. This result is relevant for competition policy since assessing market concentration using HHI index could be misleading in some situations.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2009-05.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 09-05.

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Length: 15 pages
Date of creation: Mar 2009
Date of revision: Mar 2009
Handle: RePEc:lam:wpaper:09-05

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  1. Brock, William A & Scheinkman, Jose A, 1985. "Price Setting Supergames with Capacity Constraints," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 371-82, July.
  2. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  4. 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.
  5. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
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Cited by:
  1. Nadia Chernenko, 2013. "Market power issues in the reformed Russian electricity supply industry," Cambridge Working Papers in Economics 1358, Faculty of Economics, University of Cambridge.

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