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Market Sharing Agreements and Collusive Networks

  • Paul Belleflamme

    (Queen Mary, University of London)

  • Francis Bloch

    (GREQAM and Ecole Supérieure de Mécanique de Marseille)

This paper analyzes the formation of market sharing agreements among firms in oligopolistic markets and procurement auctions. The set of market sharing agreements defines a collusive network, and the paper provides a complete characterization of stable and efficient collusive networks when firms and markets are symmetric. Efficient networks are regular networks, where firms have the same number of market sharing agreements. Stable networks are formed of complete alliances, of different sizes, larger than a minimal threshold. Typically, stable networks display fewer market sharing agreements than the optimal network for the industry and more market sharing agreements than the socially optimal network. When firms or markets are asymmetric, incomplete alliances can form in stable networks, and stable networks may be underconnected with respect to the social optimum.

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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 443.

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Date of creation: Oct 2001
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Handle: RePEc:qmw:qmwecw:wp443
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  1. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
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  7. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  8. Sumit Joshi, 2000. "Networks of Collaboration in Oligopoly," Econometric Society World Congress 2000 Contributed Papers 0623, Econometric Society.
  9. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-99, June.
    • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
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  11. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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  13. Martin Pesendorfer, 2000. "A Study of Collusion in First-Price Auctions," Review of Economic Studies, Oxford University Press, vol. 67(3), pages 381-411.
  14. Goyal, S. & Joshi, S., 2000. "Networks of Collaboration in Oligopoly," Econometric Institute Research Papers EI 9952-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  15. Mailath, George J. & Zemsky, Peter, 1991. "Collusion in second price auctions with heterogeneous bidders," Games and Economic Behavior, Elsevier, vol. 3(4), pages 467-486, November.
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