Wednesday, March 25, 2009
Posted by D. Daniel Sokol
Edmond Baranes (LASER-CREDEN Université de Montpellier), Francois Mirabel (LASER-CREDEN Université de Montpellier), and Jean-Christophe Poudou (LASER-CREDEN Université de Montpellier) address 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.