Market Sharing Agreements and Collusive Networks

U of London Queen Mary Economics Working Paper No. 443

43 Pages Posted: 25 Oct 2001

See all articles by Paul Belleflamme

Paul Belleflamme

CORE/LIDAM, UCLouvain (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Francis Bloch

National Center for Scientific Research (CNRS); University of Angers - Research Group in Quantitative Saving (GREQAM)

Date Written: October 11, 2001

Abstract

This paper analyzes the formation of market sharing agreements among firms in oligopolistic markets and procurement auctions. The set of market sharing agreements defines a collusive network, and the paper provides a complete characterization of stable and efficient collusive networks when firms and markets are symmetric. Efficient networks are regular networks, where firms have the same number of market sharing agreements. Stable networks are formed of complete alliances, of different sizes, larger than a minimal threshold. Typically, stable networks display fewer market sharing agreements than the optimal network for the industry and more market sharing agreements than the socially optimal network. When firms or markets are asymmetric, incomplete alliances can form in stable networks, and stable networks may be underconnected with respect to the social optimum.

Keywords: market sharing, collusion, economic networks, oligopoly, auctions

JEL Classification: D43, D44

Suggested Citation

Belleflamme, Paul and Bloch, Francis and Bloch, Francis, Market Sharing Agreements and Collusive Networks (October 11, 2001). U of London Queen Mary Economics Working Paper No. 443, Available at SSRN: https://ssrn.com/abstract=288409 or http://dx.doi.org/10.2139/ssrn.288409

Paul Belleflamme (Contact Author)

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CESifo (Center for Economic Studies and Ifo Institute)

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Francis Bloch

National Center for Scientific Research (CNRS) ( email )

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France

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
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France

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