LOCALIZED COMPETITION, MULTIMARKET OPERATION, AND COLLUSIVE BEHAVIOR

This paper studies collusive behavior in a repeated oligopoly with loc alized competition. Private information about the rivals' past actions naturally arises from this market structure. The resulting communicat ion problems imply that firms should adopt strategies with sufficientl y lenient punishments. Infinite grim punishments are too severe for la rge discount factors. The standard stick-and-carrot punishments from t he perfect public information model are too severe for all discount fa ctors. Modified stick-and-carrot punishments can be used, although for a smaller range of discount factors than the standard stick-and-carro t punishments under public information.