Monday, November 1, 2010
Posted by D. Daniel Sokol
Martin C. Byford, RMIT University - School of Economics, Finance and Marketing and Joshua S. Gans, University of Melbourne - Melbourne Business School, University of Melbourne - Department of Economics describe Collusion at the Extensive Margin.
ABSTRACT: This paper is the first to examine collusion at the extensive margin (whereby firms collude by avoiding entry into each other's markets or territories). We demonstrate that such collusion offers distinct predictions for the role of multiple markets in sustaining collusion such as the use of proportionate response enforcement mechanisms, the possibilities of oligopolistic competition with a collusive fringe, and predatory entry. We argue that collusion at the extensive margin poses dicult issues for antitrust authorities relative to its intensive margin counterpart.