TEL  Vol.2 No.3 , August 2012
Collusion Sustainability with Multimarket Contacts: Revisiting HHI Tests
Abstract: Our paper focuses on the relationship between market concentration and collusion sustainability in a framework of multimarket contacts. We consider two independent and symmetric markets in which a subset of firms are active in both markets. When firms are able to transfer market power from one market to another, firms have strong incentives to collude even in a highly competitive market. This result is relevant for competition policy since assessing market concentration using HHI index could be misleading in some situations.
Cite this paper: E. Baranes, F. Mirabel and J. Poudou, "Collusion Sustainability with Multimarket Contacts: Revisiting HHI Tests," Theoretical Economics Letters, Vol. 2 No. 3, 2012, pp. 307-315. doi: 10.4236/tel.2012.23057.

[1]   M. Ivaldi, B. Jullien, P. Rey, P. Seabright and J. Tirole, “The Economics of Tacit Collusion,” IDEI Working Paper, No. 186, Report for DG Competition, European Commission, 2003,.

[2]   C. Davidson and R. Deneckere, “Horizontal Mergers and Collusive Behavior,” International Journal of Industrial Organization, Vol. 2, No. 2, 1984, pp. 117-132.

[3]   W. A. Brock and J. Scheinkman, “Price Setting Supergames with Capacity Constraints,” Review of Economic Studies, Vol. 52, No. 3, 1985, pp. 371-382. doi:10.1016/S0014-2921(01)00099-X

[4]   O. F. Compte, F. Jenny and P. Rey, “Capacity Constraints, Mergers and Collusion,” European Economic Review, Vol. 46, No. 1, 2002, pp. 1-29.

[5]   B. D. Bernheim and M. D. Whinston, “Multimarket Contact and Collusive Behavior,” Rand Journal of Economics, Vol. 21, No. 1, 1990, pp. 1-26.

[6]   F. Domanico, “Concentration in the European Electricity Industry: The Internal Market as Solution?” Energy Policy, Vol. 35, No. 10, 2007, pp. 5064-5076. doi:10.1016/j.enpol.2007.04.014.

[7]   J. W. Friedman, “A Non Cooperative Equilibrium for Supergames,” Review of Economic Studies, Vol. 28, 1971, pp. 1-12.