imprint:
Cambridge, Mass: National Bureau of Economic Research, May 2014
Published in:NBER working paper series ; no. w20163
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w20163
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Description:
We augment the multi-market collusion model of Bernheim and Whinston (1990) by allowing for firm entry into, and exit from, individual markets. We show that this gives rise to a new mechanism by which a cartel can sustain a collusive agreement: Collusion at the extensive margin whereby firms collude by avoiding entry into each other's markets or territories. We characterise parameter values that sustain this type of collusion and identify the assumptions where this collusion is more likely to hold than its intensive margin counterpart. Specifically, it is demonstrated that Where duopoly competition is fierce collusion at the extensive margin is always sustainable. The model predicts new forms of market sharing such as oligopolistic competition with a collusive fringe, and predatory entry. We also provide a theoretic foundation for the use of a proportional response enforcement mechanism