Abstract
Changes in the extent of multi-market contact (MMC) between firms often affect market outcomes - quantities and prices. This paper challenges the standard economic interpretation of this phenomenon as an indication of tacit collusion. We show that a strategic but purely competitive effect of changes in MMC can change the quantity provided in a market by a firm by as much as 50%, and the prices a firm sets by as much as 20%. This may have important welfare implications, specifically with regards to horizontal mergers. Studying mergers that span several markets, we show that a myopic merger policy may thwart a surplus-increasing merger wave.
| Original language | English (US) |
|---|---|
| Publisher | Social Science Research Network (SSRN) |
| Number of pages | 56 |
| State | Published - Apr 15 2015 |