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Multi-market collusion with territorial allocation

Aditya Bhattacharjea () and Uday Sinha ()

International Journal of Industrial Organization, 2015, vol. 41, issue C, 42-50

Abstract: We develop a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce a homogeneous good and sustain collusion based on territorial allocation of markets. We first show, in a much more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove a new paradox in which the scope for collusion may be enhanced by an increase in the number of firms. The paper thus highlights several hitherto unknown theoretical implications of collusion under price competition.

Keywords: Multimarket contact; Collusion; International cartels; Price competition; Trade costs; Territorial allocation (search for similar items in EconPapers)
JEL-codes: D43 F15 L13 L22 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Multi-market Collusion with Territorial Allocation (2012) Downloads
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DOI: 10.1016/j.ijindorg.2015.05.003

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