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Multimarket contact under demand fluctuations

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  • Tadashi Sekiguchi

Abstract

The present paper studies repeated Bertrand oligopoly with multiple markets. The markets are subject to independent, stochastic fluctuations in demands. According to the literature, the demand fluctuations generally hinder collusion, while the multimarket contact sometimes facilitates it. We show that when only partial collusion is sustainable under a single market, the per-market expected profit under the most collusive equilibrium increases with the number of markets. Further, the difference between the total expected profit under full collusion and that under the most collusive equilibrium vanishes, if the number of markets goes to infinity. Thus the collusion-deterrence effects of fluctuated demands completely disappear in the limit. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Tadashi Sekiguchi, 2015. "Multimarket contact under demand fluctuations," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(4), pages 1033-1048, November.
    • Handle: RePEc:spr:jogath:v:44:y:2015:i:4:p:1033-1048
    DOI: 10.1007/s00182-015-0464-z
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    References listed on IDEAS

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    1. Matsushima, Hitoshi, 2001. "Multimarket Contact, Imperfect Monitoring, and Implicit Collusion," Journal of Economic Theory, Elsevier, vol. 98(1), pages 158-178, May.
    2. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    3. Tadashi Sekiguchi, 2013. "Multimarket Contact Under Demand Fluctuations: A Limit Result," Working Papers e052, Tokyo Center for Economic Research.
    4. Kobayashi, Hajime & Ohta, Katsunori, 2012. "Optimal collusion under imperfect monitoring in multimarket contact," Games and Economic Behavior, Elsevier, vol. 76(2), pages 636-647.
    5. 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:

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    2. Sawa, Ryoji & Zusai, Dai, 2019. "Evolutionary dynamics in multitasking environments," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 288-308.
    3. Li, Jin & Powell, Michael, 2020. "Multilateral interactions improve cooperation under random fluctuations," Games and Economic Behavior, Elsevier, vol. 119(C), pages 358-382.

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    More about this item

    Keywords

    Collusion; Demand fluctuations; Multimarket contact; Repeated games; C72; C73; D43; L13;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary 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

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