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Multi-market Collusion with Territorial Allocation

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Listed author(s):
  • ADITYA BHATTACHARJEA

    (Department of Economics, Delhi School of Economics, Delhi, India)

  • UDAY BHANU SINHA

    (Department of Economics, Delhi School of Economics, Delhi, India)

Abstract

This paper develops a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce a homogenous good and sustain collusion based on territorial allocation of markets. We first show, in a more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove a new paradox where the scope for collusion may be enhanced by an increase in the number of firms. We discuss several implications for trade and antitrust policy in this context.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 217.

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Length: 41 pages
Date of creation: Oct 2012
Handle: RePEc:cde:cdewps:217
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Keywords: Multimarket contact; collusion; trade costs; territorial allocation; cartels;

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Find related papers by JEL classification:
  • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
  • F15 - International Economics - - Trade - - - Economic Integration
  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
  • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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Cited by:

  1. Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2015. "Multi-market collusion with territorial allocation," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 42-50.

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