Sustaining cooperation with joint ventures

Russell W. Cooper, Thomas W. Ross

Research output: Contribution to journalArticle

13 Scopus citations

Abstract

Antitrust agencies and courts have expressed concerns that joint ventures and strategic alliances between firms that compete in other markets might serve to reduce the vigor of their competition. This article explores a mechanism through which a joint venture between two (or more) firms in one market can serve to facilitate collusion in another market - even one unconnected vertically or horizontally by costs or demand. In the models studied here, play in one market has the effect of altering players' beliefs about their rivals' play in the second market. A joint venture in one market may provide a credible punishment mechanism for firms colluding in another market. The joint venture may also provide a vehicle for the transmission, between players, of information in a way that helps cooperative types find each other and collude in other markets.

Original languageEnglish (US)
Pages (from-to)31-54
Number of pages24
JournalJournal of Law, Economics, and Organization
Volume25
Issue number1
DOIs
StatePublished - May 1 2009

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management
  • Law

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