Multimarket Contact, Concavity, and Collusion: on Extremal Equilibria of Interdependent Supergames

Giancarlo Spagnolo

No 104, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: Following Bernheim and Whinston (1990), this paper addresses the effects of multimarket contact on firms ability to collude in repeated oligopolies. Managerial incentives, taxation, and financial market imperfections tend to make firms objective function strictly concave in profits and market games interdependent: firms payoffs in each market depend on how they are doing in others. In this case multimarket contact always facilitates collusion, and may make it sustainable in all markets even when otherwise it would not be sustainable in any. The effects of conglomeration and horizontal mergers are discussed. The results extend to non-oligopolistic supergames with objective functions submodular in material payoffs.

Keywords: Repeated games; oligopoly; collusion; cooperation; conglomeration; mergers. (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 L21 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1996-02, Revised 1998-11-30
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Citations: View citations in EconPapers (1)

Forthcoming in Journal of Economic Theory, 1999, pages 127-139.

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