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Multimarket and multiproject collusion

Why European integration may reduce intra-community competition

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Summary

If firms meet in a number of markets, they may respond to an action in one market by reacting in another market. Fear for such retaliation may induce multimarket firms to collude across markets. The paper assesses available theoretical and empirical evidence on the multimarket collusion theory. Moreover, the paper suggests that the theory can be fruitfully applied in the context of European integration. The focus is on collusion by firms which meet in product markets as well as in joint R&D projects. A model develops three propositions, which shed light on the subsequently provided (tentative) evidence on multidimensional contact in an integrating Europe. The discussion may serve as a framework for future research into both the theoretical and the empirical domain with applications to the issue of European integration.

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Authors and Affiliations

  1. Faculty of Economics and Business Administration, University of Limburg, P.O. Box 616, 6200 MD, Maastricht, The Netherlands

    Marc Van Wegberg & Arjen Van Witteloostuijn

  2. Baliststraat 107I II, 1094 JG, Amsterdam, The Netherlands

    Michiel Roscam Abbing

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  1. Marc Van Wegberg
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  2. Arjen Van Witteloostuijn
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  3. Michiel Roscam Abbing
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We gratefully acknowledge John Hagedoorn for providing access to the MERIT/CATI database, and two referees for their comments. Of course, the usual disclaimer applies

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Van Wegberg, M., Van Witteloostuijn, A. & Abbing, M.R. Multimarket and multiproject collusion. De Economist 142, 253–285 (1994). https://doi.org/10.1007/BF01431973

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