Issue: Autumn 1996
Pages: pp. 596-617
Authors: Owen R. Phillips and Charles F. Mason
Title: Market Regulation and Multimarket Rivalry
Abstract: Multimarket contact between duopolists in an X and Y market is modelled with a trigger strategy. We show that mildly restrictive price-cap regulation in the X market decreases Y market quantities; but restrictive caps in the X market have a positive impact on Y market outputs. Behavior in laboratory markets confirms these propositions. Regulation that lowers X market prices by a small amount results in a statistically significant reduction in Y outputs. When the regulated X market price is reduced to the Cournot/Nash level, Y market outputs rise to a point statistically indistinguishable from the unregulated quantities.
Market Structure, Firm Strategy, and Market Performance: Oligopoly and Other Imperfect Markets
Monopolistic Competition
Contestable Markets (L130)
Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection (D430)
Market Structure: Industrial Organization and Corporate Strategy (6110)
Microeconomics Theory of Firm and Industry under Imperfectly Competitive Market Structures (0226)