Definition of multi-market competition

Multi-market competition is an economic situation where two or more firms are in competition against each other at the same time and in different markets (products or places). When these firms are in contact several times and in several places, this multi-market competition can lead to a particular phenomenon called “mutual forbearance”.

Mutual forbearance is a reduction of the intensity of the competition through familiarity and deterrence. Trying to avoid a price war, competitors, particularly if they have asymmetric positions, can have interests to slow down their commercial behavior on each others market.

Example

Famous situations of multi-market competition are known particularly in the airline industry and in the hotel industry. Hubs or domestic markets are in these cases considered as centres of their sphere of influence. On selected lines or offers, multimarket contacts bring high prices or higher profits.

The construction of the European electricity and gas market has also lead to the development of a multimarket competition. The rapid development of European position for the former national monopolies set up multimarket contacts between EDF, ENEL, and Endesa in France, Italy, and Spain. It stopped with the takeover of Endesa by Enel, in 2007. [1]

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