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Market Sharing Agreements and Collusive Networks*
Author(s) -
Belleflamme Paul,
Bloch Francis
Publication year - 2004
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2004.00130.x
Subject(s) - commit , oligopoly , collusion , common value auction , business , industrial organization , microeconomics , reciprocal , procurement , set (abstract data type) , economics , cournot competition , computer science , marketing , programming language , linguistics , philosophy , database
We analyze reciprocal market sharing agreements by which firms commit not to enter each other's territory in oligopolistic markets and procurement auctions. The set of market sharing agreements defines a collusive network. We characterize stable collusive networks when firms and markets are symmetric. Stable networks are formed of complete alliances, of different sizes, larger than a minimal threshold. Typically, stable networks display fewer agreements than the optimal network for the industry and more agreements than the socially optimal network. When firms or markets are asymmetric, stable networks may involve incomplete alliances and be underconnected with respect to the social optimum.