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Market Power and Multimarket Contact: Some Evidence from the Spanish Hotel Industry[Note 1. This is an extensively revised version of Nerea Fernández’s ...]
Author(s) -
Fernández Nerea,
Marín Pedro L.
Publication year - 1998
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00073
Subject(s) - competition (biology) , market power , industrial organization , business , power (physics) , microeconomics , economics , ecology , physics , quantum mechanics , biology , monopoly
This paper analyses the effect of multimarket contact on firms’ behaviour. According to Bernheim and Whinston [1990], firms that meet in several markets for an infinite number of periods may find it profitable to redistribute market power among markets where they are operating. We present evidence supporting this prediction by using data from the Spanish hotel industry. Moreover, we also find that the omission of variables measuring multimarket contact creates a downward bias on the effect of concentration on prices. This result questions previous conclusions about the role of competition in industries where multimarket behaviour is expected.