Collusion in Multiproduct Oligopoly Games under a Finite Horizon.

Applying recent results on finitely repeated games to oligopoly theory, the author finds that there exists a class of finite horizon output games in which collusion can be achieved as a subgame perfect equilibrium. Trigger strategies prevent defection from the cooperative outcome by credibly threatening that the defector will be forced to exit the industry. For the case of a multiproduct oligopoly, it is shown that collusion in one market can be enforced by the threat of punishment in a second market if someone defects. Even though the two markets are structurally independent, the firms make them strategically interdependent through their strategies. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.