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Changes in the extent of multi-market contact (MMC) between firms often affect market outcomes — quantities and prices. This paper challenges the standard economic interpretation of this phenomenon as an indication of tacit collusion. We show that a strategic but purely competitive effect of changes in MMC can change the quantity provided in a market by a firm by as much as 50%, and the prices a firm sets by as much as 20%.
This may have important welfare implications, specifically with regards to horizontal mergers. Studying mergers that span several markets, we show that a myopic merger policy may thwart a surplus-increasing merger wave.

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