MULTIMARKET CONTACT UNDER DEMAND FLUCTUATIONS: A LIMIT RESULT

Tadashi Sekiguchi

No e052, Working Papers from Tokyo Center for Economic Research

Abstract: The present paper studies repeated oligopoly where the firms compete with price in multiple markets. The markets are subject to independent, stochastic fluctuations in demands. The literature points out that while the demand fluctuations generally hinder collusion, the multimarket contact sometimes facilitates it. We show that on an intermediate range of discount factors where only partial collusion is possible under a single market, the difference between the profit under full collusion and the maximum equilibrium profit converges to zero, if the number of markets goes to infinity. Thus the collusion-deterrence effects of fluctuated demands completely vanish in the limit.

Pages: 17 pages
Date: 2013-01
New Economics Papers: this item is included in nep-com and nep-mic
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