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Market Power and Multimarket Contact: Some Evidence from the Spanish Hotel Industry

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  • Nerea Fernández
  • Pedro L. Marín

Abstract

This paper analyses the effect of multimarket contact on firms’ behaviour. According to Bernheim and Whinston [1990], firms that meet in several markets for an infinite number of periods may find it profitable to redistribute market power among markets where they are operating. We present evidence supporting this prediction by using data from the Spanish hotel industry. Moreover, we also find that the omission of variables measuring multimarket contact creates a downward bias on the effect of concentration on prices. This result questions previous conclusions about the role of competition in industries where multimarket behaviour is expected.

Suggested Citation

  • Nerea Fernández & Pedro L. Marín, 1998. "Market Power and Multimarket Contact: Some Evidence from the Spanish Hotel Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 301-315, September.
  • Handle: RePEc:bla:jindec:v:46:y:1998:i:3:p:301-315
    DOI: 10.1111/1467-6451.00073
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