On Interdependent Supergames: Multimarket Contact, Concavity and Collusion

Spagnolo, Giancarlo

doi:10.2139/ssrn.162812

Download This Paper

Open PDF in Browser

Add Paper to My Library

On Interdependent Supergames: Multimarket Contact, Concavity and Collusion

12 Pages Posted: 10 May 1999

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

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

There are 2 versions of this paper

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: 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