Market Sharing Agreements and Collusive Networks

25 Pages Posted: 2 Jun 2004

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Francis Bloch

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

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Abstract

We analyze reciprocal market sharing agreements by which firms commit not to enter each other's territory in oligopolistic markets and procurement auctions. The set of market sharing agreements defines a collusive network. We characterize stable collusive networks when firms and markets are symmetric. Stable networks are formed of complete alliances, of different sizes, larger than a minimal threshold. Typically, stable networks display fewer agreements than the optimal network for the industry and more agreements than the socially optimal network. When firms or markets are asymmetric, stable networks may involve incomplete alliances and be underconnected with respect to the social optimum.

Suggested Citation

Belleflamme, Paul and Bloch, Francis, Market Sharing Agreements and Collusive Networks. International Economic Review, Vol. 45, No. 2, pp. 387-411, May 2004. Available at SSRN: https://ssrn.com/abstract=531316

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Francis Bloch

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

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

National Center for Scientific Research (CNRS) ( email )

54, boulevard Raspail
Paris, 75006
France

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