Multimarket and multiproject collusion - Why European integration may reduce intra-community competition

If firms meet in a number of markets, they may respond to an action in one market by reacting in another market. Fear for such retaliation may induce multimarket firms to collude across markets. The paper assesses available theoretical and empirical evidence on the multimarket collusion theory. Moreover, the paper suggests that the theory can be fruitfully applied in the context of European integration. The focus is on collusion by firms which meet in product markets as well as in joint R&D projects. A model develops three propositions, which shed light on the subsequently provided (tentative) evidence on multidimensional contact in an integrating Europe. The discussion may serve as a framework for future research into both the theoretical and the empirical domain with applications to the issue of European integration.