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On Interdependent Supergames: Multimarket Contact, Concavity, and Collusion

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  • Spagnolo, G.

Abstract

This paper addresses the effects of multimarket contact on firms’ ability to collude. Real world imperfections tend to makes firms’ objective function strictly concave and market supergames ‘interdependent’: firms’ payoffs in each market depend on how they are doing in others. Then, multimarket contact always facilitates collusion. It may even make it sustainable in all markets when otherwise it would not be sustainable in any. The effects of conglomeration are discussed. ‘Multi-game contact’ is shown to facilitate cooperation in non-oligopolistic supergames as long as agents’ objectives function is submodular in material payoffs.

Suggested Citation

  • Spagnolo, G., 1999. "On Interdependent Supergames: Multimarket Contact, Concavity, and Collusion," Cambridge Working Papers in Economics 9914, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:9914
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    More about this item

    Keywords

    Repeated games; Oligopoly; Collusion; Cooperation; Conglomeration; Mergers;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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