Multimarket Contact and Price Coordination in the Cellular Telephone Industry

Empirical studies have conŽrmed the prediction of theoretical models that contact in multiple markets may enhance Žrms’ abilities to tacitly collude and consequently achieve higher prices and proŽts. It has remained largely unexplored, however, how Žrms coordinate their actions. This paper identiŽes a method of pricing in the cellular telephone industry that seems to enable Žrms to coordinate their actions across markets. This pricing pattern is found to raise prices by approximately 7–10%, and cannot be attributed to a variety of noncooperative explanations.