Collusion at the Extensive Margin

Martin C. Byford, RMIT University
Joshua S. Gans, University of Toronto

Abstract

This paper is the first to examine collusion at the extensive margin (whereby firms collude by avoiding entry into each other’s markets or territories). We demonstrate that such collusion offers distinct predictions for the role of multiple markets in sus- taining collusion such as the use of proportionate response enforcement mechanisms, the possibilities of oligopolistic competition with a collusive fringe, and predatory en- try. We argue that collusion at the extensive margin poses difficult issues for antitrust authorities relative to its intensive margin counterpart.