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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Davidson, Carl, 1984. "Cartel stability and tariff policy," Journal of International Economics, Elsevier, vol. 17(3-4), pages 219-237, November.
  2. Vasconcelos, Helder, 2008. "Sustaining Collusion in Growing Markets," CEPR Discussion Papers 6865, C.E.P.R. Discussion Papers.
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  4. Hackner, Jonas, 1995. "Endogenous product design in an infinitely repeated game," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 277-299.
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  10. Albaek, Svend & Lambertini, Luca, 1998. "Collusion in differentiated duopolies revisited," Economics Letters, Elsevier, vol. 59(3), pages 305-308, June.
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  13. 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.
  14. Connor, John M. & Bolotova, Yuliya, 2006. "Cartel overcharges: Survey and meta-analysis," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1109-1137, November.
  15. Hackner, Jonas, 1996. "Optimal symmetric punishments in a Bertrand differentiated products duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 611-630, July.
  16. Lommerud, Kjell Erik & Sorgard, Lars, 2001. "Trade Liberalization and Cartel Stability," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 343-55, May.
  17. 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.
  18. Syropoulos, Constantinos, 1992. "Quantitative restrictions and tariffs with endogenous firm behavior," European Economic Review, Elsevier, vol. 36(8), pages 1627-1646, December.
  19. Tom Ross, 1990. "Cartel Stability And Product Differentiation," Carleton Industrial Organization Research Unit (CIORU) 90-04, Carleton University, Department of Economics.
  20. Pinto, Brian, 1986. "Repeated games and the reciprocal dumping model of trade," Journal of International Economics, Elsevier, vol. 20(3-4), pages 357-366, May.
  21. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-68, June.
  22. Miklós-Thal, Jeanine, 2008. "Delivered pricing and the impact of spatial differentiation on cartel stability," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1365-1380, November.
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