Abstract
In this study, we develop theory and examine empirical evidence regarding the implications of multisupplier contact (MSC) – a concept parallel to that of multimarket contact (MMC) but in reference to factor markets wherein two or more firms purchase input resources from more than one of the same suppliers. We predict that MSC can give rise to mutual forbearance in upstream (factor) markets, but only when the resources involved are relatively mobile. Further, we develop theory to predict that MMC in downstream markets has important implications for mutual forbearance in factor markets (upstream markets) as well as its more familiar implications in downstream markets. We test our theory with a sample of public electricity-generating companies competing in both downstream wholesale electricity markets and upstream coal supply markets and report strong support for most of our hypotheses.
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