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Credible collusion in multimarket oligopoly

Author

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  • Timothy L. Sorenson

    (Department of Economics, Albers School of Business and Economics, Seattle University, Washington, USA)

Abstract

This article refines an established explanation of how multimarket contact facilitates collusion when firms enjoy reciprocal advantages across markets: When there are reciprocal asymmetries between firms, multimarket contact allows them not only to develop spheres of influence, but also to implement attractively simple strategies that are subgame perfect and weakly renegotiation proof. Hence, collusive equilibria are supported by fully credible punishments. A significant implication is, multimarket contact involving reciprocal differences between firms may be more facilitating to their cooperative efforts than multimarket contact based on other factors. The article discusses existing empirical work as it relates to this implication. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Timothy L. Sorenson, 2007. "Credible collusion in multimarket oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 115-128.
    • Handle: RePEc:wly:mgtdec:v:28:y:2007:i:2:p:115-128
    DOI: 10.1002/mde.1314
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    References listed on IDEAS

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    Cited by:

    1. Paolo Coccorese & Alfonso Pellecchia, 2009. "Multimarket Contact and Profitability in Banking: Evidence from Italy," Journal of Financial Services Research, Springer;Western Finance Association, vol. 35(3), pages 245-271, June.
    2. Agbo, Maxime & Rousselière, Damien & Salanié, Julien, 2015. "Agricultural marketing cooperatives with direct selling: A cooperative–non-cooperative game," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 56-71.
    3. Hwa Ryung Lee, 2010. "Multimarket contact effect on collusion through diversification," IEW - Working Papers 501, Institute for Empirical Research in Economics - University of Zurich.
    4. Pham, Tho & Talavera, Oleksandr & Yang, Junhong, 2016. "Multimarket Competition and Profitability: Evidence from Ukrainian banking," MPRA Paper 72376, University Library of Munich, Germany.
    5. Cruz-García, Paula & Fernández de Guevara, Juan & Maudos, Joaquín, 2021. "Bank competition and multimarket contact intensity," Journal of International Money and Finance, Elsevier, vol. 113(C).
    6. repec:hal:journl:halshs-01098762 is not listed on IDEAS
    7. Coccorese, Paolo & Pellecchia, Alfonso, 2013. "Multimarket contact, competition and pricing in banking," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 187-214.

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