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Collusion Sustainability with Multimarket Contacts: Revisiting HHI Tests

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  • Edmond Baranes
  • Francois Mirabel
  • Jean-Christophe Poudou

Abstract

Our paper focuses on the relationship between market concentration and collusion sustainability in a framework of multimarket contacts. We consider two independent and symmetric markets in which a subset of firms are active in both markets. When firms are able to transfer market power from one market to another, firms have strong incentives to collude even in a highly competitive market. This result is relevant for competition policy since assessing market concentration using HHI index could be misleading in some situations.

Suggested Citation

  • Edmond Baranes & Francois Mirabel & Jean-Christophe Poudou, 2009. "Collusion Sustainability with Multimarket Contacts: Revisiting HHI Tests," Working Papers 09-05, LAMETA, Universtiy of Montpellier, revised Mar 2009.
    • Handle: RePEc:lam:wpaper:09-05
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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2009-05.pdf
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    References listed on IDEAS

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    1. Domanico, Fabio, 2007. "Concentration in the European electricity industry: The internal market as solution?," Energy Policy, Elsevier, vol. 35(10), pages 5064-5076, October.
    2. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
    3. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
    5. William A. Brock & José A. Scheinkman, 1985. "Price Setting Supergames with Capacity Constraints," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 371-382.
    6. 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.
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    Cited by:

    1. Xiaowei Wang & Kunhui Ye & Taozhi Zhuang & Rui Liu, 2022. "The Influence of Collusive Information Dissemination on Bidder’s Collusive Willingness in Urban Construction Projects," Land, MDPI, vol. 11(5), pages 1-14, April.
    2. Nadia Chernenko, 2013. "Market power issues in the reformed Russian electricity supply industry," Cambridge Working Papers in Economics 1358, Faculty of Economics, University of Cambridge.

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