Traditional analyses of industrial behavior typically link the exercise of market power in an industry to the internal features of that industry such as demand conditions, concentration ratios, barriers-to-entry, and specifc anticompetitive practices. Some economists have argued that the sheer size of a firm, even when size is measured in absolute terms rather than relative to any particular market, is an important determinant of potential collusion. One aspect of this concern relates to the way multimarket contact among large, diversified firms may blunt competition. Despite the prevalence of multimarket contact among firms, relatively little research has focused on the potential link between multimarket contact and economic performance. The contribution of this project comes from extending preliminary work by the investigator that finds that multimarket contact does support collusion under certain natural conditions. The results of this project could show that antitrust policy should consider both the relative and absolute size of firms. The project considers other significant and unresolved issues in industrial organization such as the process of exit in declining industries for multiplant firms. The project examines the phenomena of learning-by-doing if consumers rationally forecast future price declines that result from learning and delay their purchases to take advantage of these declines. It considers the effects on the nature of collusive equilibria in repeated price-setting games of allowing firms to voluntarily limit their sales. Although the investigator is just starting his career, he has already published important papers on related topics. He can do the research.
