On the Stability of Multimarket Collusion in Price-Setting Supergames
Eric W. Bond
Vanderbilt University - College of Arts and Science - Department of Economics
LeBow College of Business, Drexel University
affiliation not provided to SSRN
October 5, 2011
In this paper we examine how trade liberalization affects collusive stability in the context of multimarket interactions. The model we consider is a segmented-markets duopoly in which price-setting firms pool their incentive constraints across markets to sustain their most collusive outcome. We find that, when goods are very close substitutes and trade costs are sufficiently high, trade liberalization facilitates collusion. Exactly the opposite is true if, for any given degree of product substitutability, trade costs are sufficiently low. We also study the dependence of multimarket collusion on product differentiation.
Number of Pages in PDF File: 35
Keywords: Multimarket cartels, trade costs, product differentiation
JEL Classification: D43, L12, L13, L41, F10, F12, F13, F15, F42working papers series
Date posted: October 9, 2011 ; Last revised: February 17, 2012
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