Multimarket Contact Under Demand Fluctuations: A Limit Result

17 Pages Posted: 8 Apr 2013

See all articles by Tadashi Sekiguchi

Tadashi Sekiguchi

Kobe University; Kyoto University - Institute of Economic Research

Date Written: January 27, 2013

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.

Keywords: collusion, demand fluctuations, multimarket contact, repeated games

JEL Classification: C72, C73, D43, L13

Suggested Citation

Sekiguchi, Tadashi and Sekiguchi, Tadashi, Multimarket Contact Under Demand Fluctuations: A Limit Result (January 27, 2013). Tokyo Center for Economic Research (TCER) Paper No. E-52, Available at SSRN: https://ssrn.com/abstract=2246440 or http://dx.doi.org/10.2139/ssrn.2246440

Tadashi Sekiguchi (Contact Author)

Kyoto University - Institute of Economic Research ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto 606-8501
Japan

Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

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