Collusion at the Extensive Margin

Martin Byford
RMIT University

Joshua Gans
University of Melbourne

September 2010
 Introduction
The Model

Introduction Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Introduction Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at the intensive margin involves firms coordinating their

strategic actions within the markets in which they come into contact.

Collusion at
the Extensive
Margin
 Introduction
The Model

Introduction Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at the intensive margin involves firms coordinating their

strategic actions within the markets in which they come into contact.

Collusion at the extensive margin involves firms coordinating their

participation across markets in order to avoid coming into contact.

Collusion at
the Extensive
Margin
 Introduction
The Model

Introduction Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at the intensive margin involves firms coordinating their

strategic actions within the markets in which they come into contact.

Collusion at the extensive margin involves firms coordinating their

participation across markets in order to avoid coming into contact.

This paper is the first to develop a theoretical framework for

analysing collusion at the extensive margin.

Collusion at
the Extensive
Margin
 Introduction
The Model

Motivating Case Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Motivating Case Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

In 2001 the Australian Competition and Consumer Commission took

Rural Press and Waikerie to the Federal Court of Australia alleging
anti-competitive agreement, exclusionary conduct and abuse of
market power.

Collusion at
the Extensive
Margin
 Introduction
The Model

Motivating Case Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

In 2001 the Australian Competition and Consumer Commission took

Rural Press and Waikerie to the Federal Court of Australia alleging
anti-competitive agreement, exclusionary conduct and abuse of
market power.

The matter went all the way to the High Court of Australia with the
anti-competitive agreement case upheld.

Collusion at
the Extensive
Margin
 Introduction
The Model

Motivating Case Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

In 2001 the Australian Competition and Consumer Commission took

Rural Press and Waikerie to the Federal Court of Australia alleging
anti-competitive agreement, exclusionary conduct and abuse of
market power.

The matter went all the way to the High Court of Australia with the
anti-competitive agreement case upheld.

The basic story was one of collusion at the extensive margin.

Collusion at
the Extensive
Margin
Rural Press and Waikerie
Rural Press and Waikerie

0 50 100
Rural Press and Waikerie

0 50 100
Rural Press and Waikerie

0 50 100
Entry by the River News

0 50 100
Entry by the River News

0 50 100
 Introduction
The Model

The Threat Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
The attached copies of pages from The River News were sent to me last
week. The Mannum advertising was again evident, which suggests your
Waikerie operator, John Pick, is still not focussing on the traditional area of
operations.

I wanted to formally record my desire to reach an understanding with your

family in terms of where each of us focuses our publishing efforts.

If you continue to attack in Mannum, a prime readership area of the Murray

Valley Standard, it may be we will have to look at expanding our operations
into areas that we have not traditionally services [sic].

I thought I would write to you so there could be no misunderstanding our

position. I will not bother you again on this subject.

Collusion at
the Extensive
Ian Law, Rural Press, 7 April 1998 Margin
The Threat

0 50 100
The Threat

0 50 100
The Response

0 50 100
The Response

0 50 100
 Introduction
The Model

Other Relevant Cases Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Other Relevant Cases Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
In Bell Atlantic v. Twombly it was alleged that the Baby Bells conspired Frameworks

to restrict competition for local telephone services by failing to

expand into one and other’s territories.

Collusion at
the Extensive
Margin
 Introduction
The Model

Other Relevant Cases Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
In Bell Atlantic v. Twombly it was alleged that the Baby Bells conspired Frameworks

to restrict competition for local telephone services by failing to

expand into one and other’s territories.

The Supreme Court held that parallel conduct alone does not
create a plausible inference of an illegal arrangement.

Collusion at
the Extensive
Margin
 Introduction
The Model

Other Relevant Cases Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
In Bell Atlantic v. Twombly it was alleged that the Baby Bells conspired Frameworks

to restrict competition for local telephone services by failing to

expand into one and other’s territories.

The Supreme Court held that parallel conduct alone does not
create a plausible inference of an illegal arrangement.

Apple followed Google’s entry into the smart phone market by

purchasing the mobile advertising company Quattro Wireless and
announcing the iAds service.

Collusion at
the Extensive
Margin
 Introduction
The Model

Other Relevant Cases Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
In Bell Atlantic v. Twombly it was alleged that the Baby Bells conspired Frameworks

to restrict competition for local telephone services by failing to

expand into one and other’s territories.

The Supreme Court held that parallel conduct alone does not
create a plausible inference of an illegal arrangement.

Apple followed Google’s entry into the smart phone market by

purchasing the mobile advertising company Quattro Wireless and
announcing the iAds service.

It was reported that Apple’s action was a reprisal against Google

following Google’s violation of a “gentleman’s agreement”. (Stone & Collusion at
Helft, 2010) the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Edwards (1955) discussed mutual forbearance by conglomerates. Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Edwards (1955) discussed mutual forbearance by conglomerates. Uniting
Frameworks

Stigler (1964) argues that while colluding at the extensive margin may
produce the most robust collusive agreements, these agreements are
easy to detect.

Collusion at
the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Edwards (1955) discussed mutual forbearance by conglomerates. Uniting
Frameworks

Stigler (1964) argues that while colluding at the extensive margin may
produce the most robust collusive agreements, these agreements are
easy to detect.

Green and Porter (1984) show that firms may employ temporary
punishments to facilitate collusion in the presence of uncertainty.

Collusion at
the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Edwards (1955) discussed mutual forbearance by conglomerates. Uniting
Frameworks

Stigler (1964) argues that while colluding at the extensive margin may
produce the most robust collusive agreements, these agreements are
easy to detect.

Green and Porter (1984) show that firms may employ temporary
punishments to facilitate collusion in the presence of uncertainty.

Bernheim and Whinston (1990) show that multi-market contact can

facilitate collusion by pooling participation constraints.

Collusion at
the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Edwards (1955) discussed mutual forbearance by conglomerates. Uniting
Frameworks

Stigler (1964) argues that while colluding at the extensive margin may
produce the most robust collusive agreements, these agreements are
easy to detect.

Green and Porter (1984) show that firms may employ temporary
punishments to facilitate collusion in the presence of uncertainty.

Bernheim and Whinston (1990) show that multi-market contact can

facilitate collusion by pooling participation constraints.

Athey, Bagwell and Sanchirico (2003) show that firms may keep prices
rigid to assist in preserving the stability of a collusive outcome.
Collusion at
the Extensive
Margin
 Introduction
The Model

Contrasting Literature Collusive Equilibria

Uncertainty
Anti-Trust
Edwards (1955) discussed mutual forbearance by conglomerates. Uniting
Frameworks

Stigler (1964) argues that while colluding at the extensive margin may
produce the most robust collusive agreements, these agreements are
easy to detect.

Green and Porter (1984) show that firms may employ temporary
punishments to facilitate collusion in the presence of uncertainty.

Bernheim and Whinston (1990) show that multi-market contact can

facilitate collusion by pooling participation constraints.

Athey, Bagwell and Sanchirico (2003) show that firms may keep prices
rigid to assist in preserving the stability of a collusive outcome.
Collusion at
Fershtman and Pakes (2000) use a semi-collusive Markov perfect the Extensive
equilibrium to isolate collusion on a single dimension. Margin
 Introduction
The Model

Bernheim-Whinston (1990) Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Bernheim-Whinston (1990) Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Simple intuition: firms should enter multiple markets to improve

cartel stability.

Collusion at
the Extensive
Margin
 Introduction
The Model

Bernheim-Whinston (1990) Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Simple intuition: firms should enter multiple markets to improve

cartel stability.

Complication: requires some combination of non-identical firms,

markets and non-constant returns to scale.

Collusion at
the Extensive
Margin
 Introduction
The Model

Bernheim-Whinston (1990) Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Simple intuition: firms should enter multiple markets to improve

cartel stability.

Complication: requires some combination of non-identical firms,

markets and non-constant returns to scale.
That is, multi-market contact is irrelevant with identical firms,
markets and constant returns to scale.

Collusion at
the Extensive
Margin
 Introduction
The Model

Bernheim-Whinston (1990) Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Simple intuition: firms should enter multiple markets to improve

cartel stability.

Complication: requires some combination of non-identical firms,

markets and non-constant returns to scale.
That is, multi-market contact is irrelevant with identical firms,
markets and constant returns to scale.

Did not consider the possibility that collusion might involve market
forbearance.
Collusion at
the Extensive
Margin
 Introduction
The Model

Research Questions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Research Questions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

What conditions support collusion at the extensive margin?

Collusion at
the Extensive
Margin
 Introduction
The Model

Research Questions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

What conditions support collusion at the extensive margin?

How does the presence of multiple markets facilitate collusion?

Collusion at
the Extensive
Margin
 Introduction
The Model

Research Questions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

What conditions support collusion at the extensive margin?

How does the presence of multiple markets facilitate collusion?

How do different enforcement mechanisms perform in terms of

stability and expected returns?

Collusion at
the Extensive
Margin
 Introduction
The Model

Research Questions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

What conditions support collusion at the extensive margin?

How does the presence of multiple markets facilitate collusion?

How do different enforcement mechanisms perform in terms of

stability and expected returns?

What are the implications for anti-trust policy of collusion taking

place at the extensive margin?
Collusion at
the Extensive
Margin
The Model
 Introduction
The Model

Primitives Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Primitives Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
A finite set I of firms.

Collusion at
the Extensive
Margin
 Introduction
The Model

Primitives Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
A finite set I of firms.

A finite set N of distinct markets or separable market segments.

Collusion at
the Extensive
Margin
 Introduction
The Model

Primitives Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
A finite set I of firms.

A finite set N of distinct markets or separable market segments.

Entry into a market costs a firm an amount c. The cost of

maintaining a presence is captured in the profit function.

Collusion at
the Extensive
Margin
 Introduction
The Model

Primitives Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
A finite set I of firms.

A finite set N of distinct markets or separable market segments.

Entry into a market costs a firm an amount c. The cost of

maintaining a presence is captured in the profit function.

Each market is modelled as a repeated simultaneous moves non-

cooperative game.

Collusion at
the Extensive
Margin
 Introduction
The Model

Primitives Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
A finite set I of firms.

A finite set N of distinct markets or separable market segments.

Entry into a market costs a firm an amount c. The cost of

maintaining a presence is captured in the profit function.

Each market is modelled as a repeated simultaneous moves non-

cooperative game.

The game has an infinite number of periods. All firms have identical
discount rate, δ. Collusion at
the Extensive
Margin
Timing
 Timing

Period t
 Timing

Participation
Stage

Period t
 Timing

Participation
Stage

Period t State Revealed

 Timing

Participation Market
Stage Stage

Period t State Revealed

 Timing

Participation Market
Stage Stage

Instantaneous
Period t State Revealed
Profits Realised
 Introduction
The Model

Markov Perfect Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Markov Perfect Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
The general model nests Bernheim and Whinston’s (1990) model of Frameworks
multi-market contact. From the perspective of the basic framework
the key addition is the inclusion of the participation stage.

Collusion at
the Extensive
Margin
 Introduction
The Model

Markov Perfect Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
The general model nests Bernheim and Whinston’s (1990) model of Frameworks
multi-market contact. From the perspective of the basic framework
the key addition is the inclusion of the participation stage.

In order to refine the (very large) set of subgame perfect equilibria

we confine our attention to the set of Markov Perfect equilibria
(MPE).

Collusion at
the Extensive
Margin
 Introduction
The Model

Markov Perfect Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
The general model nests Bernheim and Whinston’s (1990) model of Frameworks
multi-market contact. From the perspective of the basic framework
the key addition is the inclusion of the participation stage.

In order to refine the (very large) set of subgame perfect equilibria

we confine our attention to the set of Markov Perfect equilibria
(MPE).

In the market stage the payoff relevant information is the profile of

firm participation resulting from actions in the participation stage.

Collusion at
the Extensive
Margin
 Introduction
The Model

Markov Perfect Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
The general model nests Bernheim and Whinston’s (1990) model of Frameworks
multi-market contact. From the perspective of the basic framework
the key addition is the inclusion of the participation stage.

In order to refine the (very large) set of subgame perfect equilibria

we confine our attention to the set of Markov Perfect equilibria
(MPE).

In the market stage the payoff relevant information is the profile of

firm participation resulting from actions in the participation stage.

In the participation stage the payoff relevant information is the profile

of firm participation from the previous period. This profile dictates
Collusion at
for which markets a firm must pay an entry cost if it wishes to the Extensive
participate in the market in the current period. Margin
 Introduction
The Model

Lemma 1 Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Lemma 1 Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Assumption 1: In a one shot game each market produces a unique
(expected) equilibrium payoff vector for each profile of participation.

Collusion at
the Extensive
Margin
 Introduction
The Model

Lemma 1 Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Assumption 1: In a one shot game each market produces a unique
(expected) equilibrium payoff vector for each profile of participation.

Initially we assume that markets are identical, separable and

symmetric. The paper contains a richer model in which markets and
firms are permitted to be heterogeneous.

Collusion at
the Extensive
Margin
 Introduction
The Model

Lemma 1 Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Assumption 1: In a one shot game each market produces a unique
(expected) equilibrium payoff vector for each profile of participation.

Initially we assume that markets are identical, separable and

symmetric. The paper contains a richer model in which markets and
firms are permitted to be heterogeneous.

Oligopolistic profit to a firm in a market with q participants are

written π*(q).

Collusion at
the Extensive
Margin
 Introduction
The Model

Lemma 1 Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Assumption 1: In a one shot game each market produces a unique
(expected) equilibrium payoff vector for each profile of participation.

Initially we assume that markets are identical, separable and

symmetric. The paper contains a richer model in which markets and
firms are permitted to be heterogeneous.

Oligopolistic profit to a firm in a market with q participants are

written π*(q).

Lemma 1: In a Markov perfect equilibrium (MPE) each firm takes its

static Nash equilibrium action in the market stage, subject to the Collusion at
prevailing profile of participation. the Extensive
Margin
 Introduction
The Model

Competitive Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Competitive Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Assumption 2 (Expansion Incentive): Entry into an additional market

is always profitable for a firm, holding the participation of the
remaining firms constant.

Collusion at
the Extensive
Margin
 Introduction
The Model

Competitive Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Assumption 2 (Expansion Incentive): Entry into an additional market

is always profitable for a firm, holding the participation of the
remaining firms constant.

The strong version of assumption 2 requires MPE instantaneous

profit to satisfy π*(m) > π*(m + 1) > c for all m ≤ I.

Collusion at
the Extensive
Margin
 Introduction
The Model

Competitive Equilibrium Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Assumption 2 (Expansion Incentive): Entry into an additional market

is always profitable for a firm, holding the participation of the
remaining firms constant.

The strong version of assumption 2 requires MPE instantaneous

profit to satisfy π*(m) > π*(m + 1) > c for all m ≤ I.

Proposition 1 (Competitive Equilibrium): Where assumptions 1 and

2 hold it is always an MPE for all firms to enter and remain in every
market.
Collusion at
the Extensive
Margin
Collusive Equilibria
 Introduction
The Model

Collusive Equilibria Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Collusive Equilibria Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Where collusion takes place at the extensive margin a collusive

agreement has two components:

Collusion at
the Extensive
Margin
 Introduction
The Model

Collusive Equilibria Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Where collusion takes place at the extensive margin a collusive

agreement has two components:

A partition P of the set N of markets that assigns each market to a

firm or to a contested component of the partition in which all firms
participate. A collusive partition is characterised by the number of
markets ni in each firm i’s component of the partition.

Collusion at
the Extensive
Margin
 Introduction
The Model

Collusive Equilibria Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Where collusion takes place at the extensive margin a collusive

agreement has two components:

A partition P of the set N of markets that assigns each market to a

firm or to a contested component of the partition in which all firms
participate. A collusive partition is characterised by the number of
markets ni in each firm i’s component of the partition.

An enforcement mechanism that utilises the threat of reciprocal entry

to counter the expansion incentive.
Collusion at
the Extensive
Margin
 Partitioning Contests
Firm 1 Firm 2

Contested

Firm 3
 Introduction
The Model

Grim Strategy Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Grim Strategy Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Grim strategy enforcement requires permanent reversion to the

competitive equilibrium as soon as any firm is observed deviating
from the collusive partition.

Collusion at
the Extensive
Margin
 Introduction
The Model

Grim Strategy Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Grim strategy enforcement requires permanent reversion to the

competitive equilibrium as soon as any firm is observed deviating
from the collusive partition.

With identical, separable and symmetric markets grim strategy

collusion requires that MPE instantaneous profits decrease at rate
that is more than proportional to a change in participation:
π*(1)/m > π*(m).

Collusion at
the Extensive
Margin
 Introduction
The Model

Grim Strategy Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Grim strategy enforcement requires permanent reversion to the

competitive equilibrium as soon as any firm is observed deviating
from the collusive partition.

With identical, separable and symmetric markets grim strategy

collusion requires that MPE instantaneous profits decrease at rate
that is more than proportional to a change in participation:
π*(1)/m > π*(m).

� � � � �
∗
GS
nj π (2) − c
j�=i
δ = max � � � � �
i∈I ni π ∗ (1) − π ∗ (I) + j�=i nj π ∗ (2) − π ∗ (I) − c
Collusion at
the Extensive
Margin
 Initial Deviation (t = 1)
Firm 1 Firm 2

Contested

Firm 3
 Initial Deviation (t = 1)
Firm 1 Firm 2

Contested

Firm 3
Grim Strategy Enforcement (t ≥ 2)

Contested
 Introduction
The Model

Entry Costs Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Entry Costs Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The value of δ critical for the stability of the cartel is decreasing in the
entry cost c as barriers to entry decrease the returns to a deviation.

Collusion at
the Extensive
Margin
 Introduction
The Model

Entry Costs Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The value of δ critical for the stability of the cartel is decreasing in the
entry cost c as barriers to entry decrease the returns to a deviation.

Infinitesimal entry cost need not prevent collusive partition of

markets.

Collusion at
the Extensive
Margin
 Introduction
The Model

Entry Costs Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The value of δ critical for the stability of the cartel is decreasing in the
entry cost c as barriers to entry decrease the returns to a deviation.

Infinitesimal entry cost need not prevent collusive partition of

markets.

Where c goes to zero and N is at least as large as I there exists a

partition P that assigns an equal number of markets to each member
of the cartel which is stable for sufficiently high δ.
Collusion at
the Extensive
Margin
Uncertainty and Tit-for-Tat Equilibria
 Introduction
The Model

Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Where punishments may be triggered along the equilibrium path, or

a subset of markets display natural monopoly characteristics, a cartel
may prefer an enforcement mechanism with temporary punishments.

Collusion at
the Extensive
Margin
 Introduction
The Model

Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Where punishments may be triggered along the equilibrium path, or

a subset of markets display natural monopoly characteristics, a cartel
may prefer an enforcement mechanism with temporary punishments.

At the intensive margin temporary punishments tend to only vary in

terms of length.

Collusion at
the Extensive
Margin
 Introduction
The Model

Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Where punishments may be triggered along the equilibrium path, or

a subset of markets display natural monopoly characteristics, a cartel
may prefer an enforcement mechanism with temporary punishments.

At the intensive margin temporary punishments tend to only vary in

terms of length.

Single period punishments can be effective at the extensive margin.

Moreover, punishments can be targeted at individual firms and scaled
to match the size of an initial deviation.
Collusion at
the Extensive
Margin
 Initial Deviation (t = 1)
Firm 1 Firm 2

Contested

Firm 3
 Initial Deviation (t = 1)
Firm 1 Firm 2

Contested

Firm 3
Initial Deviation (t = 1)

Firm 1 Firm 2 Firm 3

 Initial Deviation (t = 1)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

 Initial Deviation (t = 1)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

 Introduction
The Model

Multilateral Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Multilateral Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Multilateral enforcement requires a deviation to be punished by

temporary reversion to the competitive equilibrium.

Collusion at
the Extensive
Margin
 Introduction
The Model

Multilateral Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Multilateral enforcement requires a deviation to be punished by

temporary reversion to the competitive equilibrium.

If at least one firm is present in another firm’s market, and at least

one firm is not present in every market, then all firms enter every
market.

Collusion at
the Extensive
Margin
 Introduction
The Model

Multilateral Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Multilateral enforcement requires a deviation to be punished by

temporary reversion to the competitive equilibrium.

If at least one firm is present in another firm’s market, and at least

one firm is not present in every market, then all firms enter every
market.

Otherwise all firms withdraw from every market belonging to a rival

player.
Collusion at
the Extensive
Margin
 Multilateral Response (t = 2)
Firm 1 Firm 2

Contested

Firm 3
 Multilateral Response (t = 2)
Firm 1 Firm 2

3
1

2 Contested 1
3 3

Firm 3
3 2

1 2
1 2
 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

Gain in Period 2 4π ∗ (3) 4π ∗ (3) 4π ∗ (3)

 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

Gain in Period 2 4π ∗ (3) 4π ∗ (3) 4π ∗ (3)

� ∗ ∗
� � ∗ ∗
� � ∗ ∗
�
Loss in Period 2 2 π (1) − π (3) 2 π (1) − π (3) 2 π (1) − π (3)
 Introduction
The Model

Heavy-Handed Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Heavy-Handed Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The heavy-handed enforcement mechanism treats each pair of firms

independently.

Collusion at
the Extensive
Margin
 Introduction
The Model

Heavy-Handed Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The heavy-handed enforcement mechanism treats each pair of firms

independently.

For each pair of firms {i, j}, if firm i is present in at least one of firm
j’s markets, and firms i and j are not present in all of each others
markets, then both firms enter all of each others markets.

Collusion at
the Extensive
Margin
 Introduction
The Model

Heavy-Handed Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The heavy-handed enforcement mechanism treats each pair of firms

independently.

For each pair of firms {i, j}, if firm i is present in at least one of firm
j’s markets, and firms i and j are not present in all of each others
markets, then both firms enter all of each others markets.

Otherwise firms i and j withdraw from every market belonging to

the other player.
Collusion at
the Extensive
Margin
 Heavy Handed Response (t = 2)
Firm 1 Firm 2

Contested

Firm 3
 Heavy Handed Response (t = 2)
Firm 1 Firm 2

2 Contested 1

Firm 3
2
 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

Gain in Period 2 2π ∗ (2) 2π ∗ (2)

 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

Gain in Period 2 2π ∗ (2) 2π ∗ (2)

� ∗ ∗
� � ∗ ∗
�
Loss in Period 2 2 π (1) − π (2) 2 π (1) − π (2)
 Introduction
The Model

Proportional Response Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Proportional Response Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The proportional response enforcement mechanism treats each pair

of firms independently as well as scaling punishments to the initial
transgression.

Collusion at
the Extensive
Margin
 Introduction
The Model

Proportional Response Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The proportional response enforcement mechanism treats each pair

of firms independently as well as scaling punishments to the initial
transgression.

For each pair of firms {i, j}, if firm i is present in at least one of firm
j’s markets, and firms i and j are not present in an equal number of
each others markets, then the firm in the fewest of its rival’s contests
enters additional contests sufficient to equalise cross participation.

Collusion at
the Extensive
Margin
 Introduction
The Model

Proportional Response Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The proportional response enforcement mechanism treats each pair

of firms independently as well as scaling punishments to the initial
transgression.

For each pair of firms {i, j}, if firm i is present in at least one of firm
j’s markets, and firms i and j are not present in an equal number of
each others markets, then the firm in the fewest of its rival’s contests
enters additional contests sufficient to equalise cross participation.

Otherwise firms i and j withdraw from every market belonging to

the other player.
Collusion at
the Extensive
Margin
 Proportional Response Response (t = 2)
Firm 1 Firm 2

Contested

Firm 3
 Proportional Response Response (t = 2)
Firm 1 Firm 2

2 Contested

Firm 3
 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

Gain in Period 2 π ∗ (2) π ∗ (2)

 Tit-for-Tat Response (t = 2)

Firm 1 Firm 2 Firm 3

Gain in Period 1 π ∗ (2)

Loss in Period 1 π ∗ (1) − π ∗ (2)

Gain in Period 2 π ∗ (2) π ∗ (2)

Loss in Period 2 π ∗ (1) − π ∗ (2) π ∗ (1) − π ∗ (2)

 Return to the Equilibrium Path (t > 2)
Firm 1 Firm 2

Contested

Firm 3
 Introduction
The Model

Stability Conditions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Stability Conditions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

� � �
∗
n
j�=i j π (2)
δM L = max � � �
i∈I ni π ∗ (1) − π ∗ (I) − n j π ∗ (I)
j�=i

Collusion at
the Extensive
Margin
 Introduction
The Model

Stability Conditions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

� � �
∗
n
j�=i j π (2)
δM L = max � � �
i∈I ni π ∗ (1) − π ∗ (I) − n j π ∗ (I)
j�=i

� � �
∗
n
j�=i j π (2)
δ HH = δ P R ≥ max � � �
i∈I ni π ∗ (1) − π ∗ (I) − n j π ∗ (2)
j�=i

Collusion at
the Extensive
Margin
 Introduction
The Model

Uncertainty and Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Uncertainty and Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Suppose that with some small probability a player makes a mistake
and enters too many markets in the participation stage. Suppose
further that this mistake is commonly observed.

Collusion at
the Extensive
Margin
 Introduction
The Model

Uncertainty and Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Suppose that with some small probability a player makes a mistake
and enters too many markets in the participation stage. Suppose
further that this mistake is commonly observed.

The expected cost to firms of a mistake is higher under heavy

handed enforcement than under proportional response enforcement.
It follows that proportional response enforcement is payoff dominant.

Collusion at
the Extensive
Margin
 Introduction
The Model

Uncertainty and Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Suppose that with some small probability a player makes a mistake
and enters too many markets in the participation stage. Suppose
further that this mistake is commonly observed.

The expected cost to firms of a mistake is higher under heavy

handed enforcement than under proportional response enforcement.
It follows that proportional response enforcement is payoff dominant.

Multilateral enforcement may be stable where proportional response

enforcement is not.

Collusion at
the Extensive
Margin
 Introduction
The Model

Uncertainty and Tit-for-Tat Enforcement Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Suppose that with some small probability a player makes a mistake
and enters too many markets in the participation stage. Suppose
further that this mistake is commonly observed.

The expected cost to firms of a mistake is higher under heavy

handed enforcement than under proportional response enforcement.
It follows that proportional response enforcement is payoff dominant.

Multilateral enforcement may be stable where proportional response

enforcement is not.

(Caveat: It is possible to design perverse systems of uncertainty

Collusion at
where these results do not hold.) the Extensive
Margin
Predatory Entry
 Predatory Entry

Natural Monopoly Market

π m (1) > 0 > π m (2)
 Predatory Entry

Natural Monopoly Market Natural Duopoly Market

π m (1) > 0 > π m (2) π ∗ (1) > π ∗ (2) > 0
 Predatory Entry
Firm 1 Firm 2

Natural Monopoly Market Natural Duopoly Market

π m (1) > 0 > π m (2) π ∗ (1) > π ∗ (2) > 0
 Initial Deviation (t = 1)
Firm 1 Firm 2
 Initial Deviation (t = 1)
Firm 1 Firm 2

1
 Initial Deviation (t = 1)
Firm 1 Firm 2

Gain in Period 1
π ∗ (2)

1
 Initial Deviation (t = 1)
Firm 1 Firm 2

Gain in Period 1 Loss in Period 1

π ∗ (2) π ∗ (1) − π ∗ (2)

1
 Response (t = 2)
Firm 1 Firm 2

1
 Response (t = 2)
Firm 1 Firm 2

2 1
 Response (t = 2)
Firm 1 Firm 2

Gain in Period 2
π ∗ (2)

2 1
 Response (t = 2)
Firm 1 Firm 2

Gain in Period 2
π ∗ (2)

Loss in Period 2
π ∗ (1) − π m (2)

2 1
 Response (t = 2)
Firm 1 Firm 2

Gain in Period 2
π ∗ (2)

Loss in Period 2 Loss in Period 2

π ∗ (1) − π m (2) ∗ ∗ m
π (1) − π (2) + π (2)

2 1
 Return to the Equilibrium Path (t = 3)
Firm 1 Firm 2

2 1
 Return to the Equilibrium Path (t = 3)
Firm 1 Firm 2
 Introduction
The Model

Stability Conditions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

�
π ∗ (2)
δ ≥ max m ∗ m
,
π (1) − π (2) − π (2)

Collusion at
the Extensive
Margin
 Introduction
The Model

Stability Conditions Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

� �
π ∗ (2) −π m (2)
δ ≥ max m , ∗
π (1) − π (2) − π (2) π (1) − π ∗ (2) − π m (2)
∗ m

Collusion at
the Extensive
Margin
Implications for Anti-Trust Policy
 Introduction
The Model

Implications for Anti-Trust Policy Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Implications for Anti-Trust Policy Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Participation across the set of markets may be easier to observe than
a firm’s strategic behaviour within a market.

Collusion at
the Extensive
Margin
 Introduction
The Model

Implications for Anti-Trust Policy Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Participation across the set of markets may be easier to observe than
a firm’s strategic behaviour within a market.

Collusion at the extensive margin can be implemented by a smaller

group of managers than collusion at the intensive margin, helping to
reduce the risk of detection.

Collusion at
the Extensive
Margin
 Introduction
The Model

Implications for Anti-Trust Policy Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Participation across the set of markets may be easier to observe than
a firm’s strategic behaviour within a market.

Collusion at the extensive margin can be implemented by a smaller

group of managers than collusion at the intensive margin, helping to
reduce the risk of detection.

A cartel may be able to avoid prosecution by aligning the boundaries

of a collusive partition with the boundaries of anti-trust authority
jurisdictions.

Collusion at
the Extensive
Margin
 Introduction
The Model

Implications for Anti-Trust Policy Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks
Participation across the set of markets may be easier to observe than
a firm’s strategic behaviour within a market.

Collusion at the extensive margin can be implemented by a smaller

group of managers than collusion at the intensive margin, helping to
reduce the risk of detection.

A cartel may be able to avoid prosecution by aligning the boundaries

of a collusive partition with the boundaries of anti-trust authority
jurisdictions.

The theory provides new insights into where we may find a collusive
Collusion at
agreement operating. the Extensive
Margin
Management Complicity in Multi-Market Collusion
Management Complicity in Multi-Market Collusion

Firm Level
Management Complicity in Multi-Market Collusion

Firm Level

Vic Tas Qld NT

WA NSW SA
Management Complicity in Extensive Margin
Collusion

Firm Level

WA NSW SA
Management Complicity in Extensive Margin
Collusion

Firm Level

WA NSW SA

Monopoly Monopoly
Management Complicity in Extensive Margin
Collusion

Firm Level

WA NSW SA

Monopoly Competitive Monopoly

Management Complicity in Extensive Margin
Collusion

Firm Level
Transnational Extensive Margin Collusion
 Transnational Extensive Margin Collusion

Firm 1 Firm 2

Firm 3
 Transnational Extensive Margin Collusion

Firm 1 Firm 2

ACCC

Firm 3
 Transnational Extensive Margin Collusion

Firm 1 Firm 2

Competition ACCC
Bureau

Firm 3
 Transnational Extensive Margin Collusion

Firm 1 Firm 2

Competition ACCC
Bureau

Firm 3
Competition
Commission
Transnational Extensive Margin Collusion

Firm 1

Competition
Bureau
 Transnational Extensive Margin Collusion

Firm 1 Firm 2

Competition ACCC
Bureau

Firm 3
Competition
Commission
Beer or Soft Drink Market
Beer or Soft Drink Market

Retail Sales
 Beer or Soft Drink Market

Vending Machine Location B

Convenience Store A

Vending Machine Location C

Restaurant Chain A

Restaurant Chain B
Bar A

Retail Sales
Bar B
Convenience Store B Vending Machine Location A

Sports Ground

Restaurant Chain C
Entertainment Venue
 Collusive Fringe
Firm 1 Firm 2

Convenience Store A Vending Machine Location B

Vending Machine Location C

Restaurant Chain A
Contested

Bar A Restaurant Chain B

Bar B Retail Sales
Convenience Store B
Vending Machine Location A

Sports Ground Restaurant Chain C

Entertainment Venue
 Uniting Frameworks:
Collusion at the Intensive and Extensive
Margins
 Introduction
The Model

Relative Stability Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Relative Stability Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

All MPE’s are sub-game perfect and therefore are equilibria of the
unified framework.

Collusion at
the Extensive
Margin
 Introduction
The Model

Relative Stability Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

All MPE’s are sub-game perfect and therefore are equilibria of the
unified framework.

Consider a multi-market setting containing two identical, separable

and symmetric markets and suppose that two firms collude utilising
grim strategy enforcement.

Collusion at
the Extensive
Margin
 Introduction
The Model

Relative Stability Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

All MPE’s are sub-game perfect and therefore are equilibria of the
unified framework.

Consider a multi-market setting containing two identical, separable

and symmetric markets and suppose that two firms collude utilising
grim strategy enforcement.

If the firms collude at the intensive margin of both markets they each
receive πC from each market while deviating nets a firm πD.

Collusion at
the Extensive
Margin
 Introduction
The Model

Relative Stability Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

All MPE’s are sub-game perfect and therefore are equilibria of the
unified framework.

Consider a multi-market setting containing two identical, separable

and symmetric markets and suppose that two firms collude utilising
grim strategy enforcement.

If the firms collude at the intensive margin of both markets they each
receive πC from each market while deviating nets a firm πD.

π ∗ (2)
δ GS = ∗ Collusion at
π (1) − π ∗ (2)
the Extensive
Margin
 Introduction
The Model

Relative Stability Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

All MPE’s are sub-game perfect and therefore are equilibria of the
unified framework.

Consider a multi-market setting containing two identical, separable

and symmetric markets and suppose that two firms collude utilising
grim strategy enforcement.

If the firms collude at the intensive margin of both markets they each
receive πC from each market while deviating nets a firm πD.

π ∗ (2) πD − πC
δ GS = ∗ δ IM = D Collusion at
π (1) − π ∗ (2) π − π ∗ (2) the Extensive
Margin
 Introduction

Complementarities Between Collusion at The Model

Collusive Equilibria
the Intensive and Extensive Margins Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction

Complementarities Between Collusion at The Model

Collusive Equilibria
the Intensive and Extensive Margins Uncertainty
Anti-Trust
Uniting
Frameworks
Consider a multi-market setting containing three identical, separable
and symmetric markets.

Collusion at
the Extensive
Margin
 Introduction

Complementarities Between Collusion at The Model

Collusive Equilibria
the Intensive and Extensive Margins Uncertainty
Anti-Trust
Uniting
Frameworks
Consider a multi-market setting containing three identical, separable
and symmetric markets.

Suppose that each firm acts as a monopolist in one market while

colluding at the intensive margin of the third market. A deviation is
punished by permanent reversion to the oligopolistically competitive
equilibrium.

Collusion at
the Extensive
Margin
 Introduction

Complementarities Between Collusion at The Model

Collusive Equilibria
the Intensive and Extensive Margins Uncertainty
Anti-Trust
Uniting
Frameworks
Consider a multi-market setting containing three identical, separable
and symmetric markets.

Suppose that each firm acts as a monopolist in one market while

colluding at the intensive margin of the third market. A deviation is
punished by permanent reversion to the oligopolistically competitive
equilibrium.

A firm can either deviate in the participation or market stage but not
both. Punishments are carried out across all markets

Collusion at
the Extensive
Margin
 Introduction

Complementarities Between Collusion at The Model

Collusive Equilibria
the Intensive and Extensive Margins Uncertainty
Anti-Trust
Uniting
Frameworks
Consider a multi-market setting containing three identical, separable
and symmetric markets.

Suppose that each firm acts as a monopolist in one market while

colluding at the intensive margin of the third market. A deviation is
punished by permanent reversion to the oligopolistically competitive
equilibrium.

A firm can either deviate in the participation or market stage but not
both. Punishments are carried out across all markets

δ crit < max{δ GS , δ IM } Collusion at

the Extensive
Margin
 Introduction
The Model

Length versus Breadth of Punishment Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Length versus Breadth of Punishment Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The temporary punishments set out in the paper persist for exactly
one period.

Collusion at
the Extensive
Margin
 Introduction
The Model

Length versus Breadth of Punishment Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The temporary punishments set out in the paper persist for exactly
one period.

The strength of each punishment can be increased by increasing the

length of the punishment.

Collusion at
the Extensive
Margin
 Introduction
The Model

Length versus Breadth of Punishment Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

The temporary punishments set out in the paper persist for exactly
one period.

The strength of each punishment can be increased by increasing the

length of the punishment.

Length and scope of punishment are substitutes.

Collusion at
the Extensive
Margin
 Introduction
The Model

Conclusion Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

Collusion at
the Extensive
Margin
 Introduction
The Model

Conclusion Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

We develop the first theoretical framework in which firms may

collude by coordinating market participation to avoid coming into
contact.

Collusion at
the Extensive
Margin
 Introduction
The Model

Conclusion Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

We develop the first theoretical framework in which firms may

collude by coordinating market participation to avoid coming into
contact.

Extensive margin collusion has a number of features that may make it

attractive for a cartel.

Collusion at
the Extensive
Margin
 Introduction
The Model

Conclusion Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

We develop the first theoretical framework in which firms may

collude by coordinating market participation to avoid coming into
contact.

Extensive margin collusion has a number of features that may make it

attractive for a cartel.

We provide the first game theoretic foundation for proportional

response enforcement.

Collusion at
the Extensive
Margin
 Introduction
The Model

Conclusion Collusive Equilibria

Uncertainty
Anti-Trust
Uniting
Frameworks

We develop the first theoretical framework in which firms may

collude by coordinating market participation to avoid coming into
contact.

Extensive margin collusion has a number of features that may make it

attractive for a cartel.

We provide the first game theoretic foundation for proportional

response enforcement.

Extensive margin collusion involves different patterns of behaviour

and poses new challenges for anti-trust authorities. Collusion at
the Extensive
Margin