Hampus Poppius: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Abstract: When ﬁrms meet in multiple markets, they can leverage punishment ability in one market to sustain collusion in another. This is the ﬁrst paper to test this theory for multiproduct retailers that sell consumer goods online. With data on the universe of consumer goods sold online in Sweden, I estimate that multimarket contact increases prices. To more closely investigate what drives the effect, I employ a machine-learning method to estimate effect heterogeneity. The main ﬁnding is that multimarket contact increases prices to a higher extent if there are fewer ﬁrms participating in the contact markets, which is one of the theoretical predictions. Previous studies focus on geographical markets, where ﬁrms provide a good or service in different locations. I instead deﬁne markets as different product markets, where each market is deﬁned by the type of good. This is the ﬁrst paper to study multimarket contact and collusion with this type of market deﬁnition. The effect is stronger than in previously studied settings.
29 pages, April 8, 2020
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