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Multimarket Contact, Concavity, and Collusion: on Extremal Equilibria of Interdependent Supergames

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  • Spagnolo, Giancarlo

    (Department of Economics)

Abstract

Following Bernheim and Whinston (1990), this paper addresses the effects of multimarket contact on firms ability to collude in repeated oligopolies. Managerial incentives, taxation, and financial market imperfections tend to make firms objective function strictly concave in profits and market games interdependent: firms payoffs in each market depend on how they are doing in others. In this case multimarket contact always facilitates collusion, and may make it sustainable in all markets even when otherwise it would not be sustainable in any. The effects of conglomeration and horizontal mergers are discussed. The results extend to non-oligopolistic supergames with objective functions submodular in material payoffs.

Suggested Citation

  • Spagnolo, Giancarlo, 1996. "Multimarket Contact, Concavity, and Collusion: on Extremal Equilibria of Interdependent Supergames," SSE/EFI Working Paper Series in Economics and Finance 104, Stockholm School of Economics, revised 30 Nov 1998.
  • Handle: RePEc:hhs:hastef:0104
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    References listed on IDEAS

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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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