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On the stability of multimarket collusion in price-setting supergames

  • Akinbosoye, Osayi
  • Bond, Eric W.
  • Syropoulos, Constantinos

In this paper we examine how trade liberalization affects collusive stability in the context of multimarket interactions. The model we consider is a segmented-markets duopoly with differentiated goods in which price-setting firms pool their incentive constraints across markets to sustain their most collusive outcome. We find that, when goods are very close substitutes and trade costs are sufficiently high, a marginal reduction in trade costs facilitates collusion. Exactly the opposite is true if, for any given degree of product substitutability, trade costs are sufficiently low. We also study the dependence of multimarket collusion on product differentiation.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 30 (2012)
Issue (Month): 2 ()
Pages: 253-264

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Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:253-264
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  15. Hélder Vasconcelos, 2008. "Sustaining Collusion in Growing Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(4), pages 973-1010, December.
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  18. Lommerund, K.E. & Sorgard, L., 1998. "Trade Liberalization and Cartel Stability," Norway; Department of Economics, University of Bergen 0198, Department of Economics, University of Bergen.
  19. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, October.
  20. Julio J. Rotemberg & Garth Saloner, 1989. "Tariffs vs Quotas with Implicit Collusion," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 237-44, May.
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