Does Multimarket Contact Facilitate Tacit Collusion? Inference on Conjectural Parameters in the Airline Industry

Federico Ciliberto and Jonathan Williams

MPRA Paper from University Library of Munich, Germany

Abstract: We nest conjectural parameters into a standard oligopoly model. The conjectural parameters are modeled as functions of multimarket contact. Using data from the US airline industry, we find: i) carriers with little multimarket contact do not cooperate in setting fares, while carriers serving many markets simultaneously sustain almost perfect coordination; ii) cross-price elasticities play a crucial role in determining the impact of multimarket contact on collusive behavior and equilibrium fares; iii) marginal changes in multimarket contact matter only at low or moderate levels of contact; iv) assuming that firms behave as Bertrand-Nash competitors leads to biased estimates of marginal costs.

Keywords: Multimarket Contact; Collusion; Differentiated Products; Airport Facilities; Airline Industry (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
Date: 2010-08-01
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (10)

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https://mpra.ub.uni-muenchen.de/27506/1/MPRA_paper_27506.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/39329/1/MPRA_paper_39329.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/39515/1/MPRA_paper_39515.pdf revised version (application/pdf)

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