When firms diversify into different markets, their diversification create multiple
market contacts with other firms, which lead to multi-market competition.
Multi-market competition: firms simultaneously compete against each other in
more than one market.
When firms diversify their competition becomes more complicated.
Markets can be:
When deciding what markets to go into, AMC model must be considered. Retaliation
could be within the market, or firms might attack other markets you are already in.
E.g. Firm 1 attacks market 8, Firm 3 attacks market 3.
Multimarket Contact: two firms simultaneously meet with each other in more than
one market. This leads to several consequences (Google vs. Apple)
Mutual understanding between two firms of each others resources and
o Familiar with each other’s behavior
Increase awareness for AMC model
o Creates an opportunity to attack/retaliate; leaves you vulnerable to
being attacked deterrence will decrease your motivation to attack
Both will cause mutual forbearance competition between both firms will
become less intense
Therefore two firms competing in one market will be more intense than in three
Single-market firms suffer due to increased competitive pressure form MMF
Customers/society suffer because MMF have little incentive to offer better
1. Perfect information you know everything about the other MMC rivals
2. Firms are capable assumes firms are capable to attack/retaliate
Implications for competitive interaction and multimarket interaction Multimarket Firms
Maintain existing MMC benefit is to reduce competition
Create more MMC increase ben