Localized Competition, Multimarket Operation, and Collusive Behavior
This paper studies collusive behavior in a repeated oligopoly with localized competition. Private information about the rivals' past actions naturally arises from this market structure. The resulting communication problems imply that firms should adopt strategies with sufficiently lenient punishments. Infinite grim punishments are too severe for large discount factors. The standard stick-and-carrot punishments from the perfect public information model are too severe for all discount factors. Modified stick-and-carrot punishments can be used, although for a smaller range of discount factors than the standard stick-and-carrot punishments under public information. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Volume (Year): 39 (1998)
Issue (Month): 2 (May)
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