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Multi-market collusion with territorial allocation

Author

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  • Bhattacharjea, Aditya
  • Sinha, Uday Bhanu
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.

Suggested Citation

  • Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2015. "Multi-market collusion with territorial allocation," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 42-50.
    • Handle: RePEc:eee:indorg:v:41:y:2015:i:c:p:42-50
    DOI: 10.1016/j.ijindorg.2015.05.003
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    1. Byford, Martin C. & Gans, Joshua S., 2014. "Collusion at the extensive margin," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 75-83.
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    Cited by:

    1. Bhattacharjea, Aditya & Sinha, Uday Bhanu, 2015. "Multi-market collusion with territorial allocation," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 42-50.
    2. Avdasheva, S., 2017. "Theory of Competition for Economic Policy," Journal of the New Economic Association, New Economic Association, vol. 35(3), pages 170-176.
    3. Xiaowei Wang & Wuyan Long & Meiyue Sang & Yang Yang, 2022. "Towards Sustainable Urbanization: Exploring the Influence Paths of the Urban Environment on Bidders’ Collusive Willingness," Land, MDPI, vol. 11(2), pages 1-14, February.
    4. Isogai, Shigeki & Shen, Chaohai, 2023. "Multiproduct firm’s reputation and leniency program in multimarket collusion," Economic Modelling, Elsevier, vol. 125(C).

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    More about this item

    Keywords

    Multimarket contact; Collusion; International cartels; Price competition; Trade costs; Territorial allocation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F15 - International Economics - - Trade - - - Economic Integration
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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