The Divergent Effects of Long-Term and Short-Term Entry Investments on Multimarket Cartels - 10.1628/jite-2019-0019 - Mohr Siebeck
Economics

Daniel Cracau, Abdolkarim Sadrieh

The Divergent Effects of Long-Term and Short-Term Entry Investments on Multimarket Cartels

Volume 175 () / Issue 3, pp. 558-581 (24)
Published 06.02.2019

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We study multimarket effects in a setting with home-market asymmetries. In our duopoly experiment each firm has a home market but may also enter the other firm's market. Without entry barriers, we observe a high level of mutual forbearance with firms serving home markets exclusively. With short-term entry barriers, the competition rates decrease significantly. Surprisingly, with long-term entry barriers, firms exhibit higher levels of competition, entering each other's market more often. We conjecture that in the latter case, bearing the cost of entryis perceived as a signal for intentions to compete, which has an adverse effect on cooperation.
Authors/Editors

Daniel Cracau No current data available.

Abdolkarim Sadrieh No current data available.