On Interdependent Supergames: Multimarket Contact, Concavity and Collusion

12 Pages Posted: 10 May 1999

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

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Date Written: March 17, 1999

Abstract

Following Bernheim and Whinston (1990), this paper addresses the effects of multimarket contact on firms' ability to collude. Real world imperfections tend to make firms' objective function strictly concave and market supergames "interdependent": firms' payoffs in each market depend on how they are doing in others. Then, multimarket contact always facilitates collusion. It may even make it sustainable in all markets when otherwise it would not be sustainable in any. The effects of conglomeration are discussed. "Multi-game contact" is shown to facilitate cooperation in supergames other than oligopolies as long as agents' objective function is submodular in material payoffs.

JEL Classification: C72, D43, L13, L21

Suggested Citation

Spagnolo, Giancarlo, On Interdependent Supergames: Multimarket Contact, Concavity and Collusion (March 17, 1999). Available at SSRN: https://ssrn.com/abstract=162812 or http://dx.doi.org/10.2139/ssrn.162812

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

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Centre for Economic Policy Research (CEPR)

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University of Rome 'Tor Vergata' ( email )

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