ABSTRACT
This chapter demonstrates that horizontally diversified firms may also benefit from increased market power compared to non-diversified firms. Unlike single business firms that compete in only one business, multi-business firms likely encounter the same competitors across several businesses. This situation is referred to as multipoint competition, that is, 'a situation where firms compete against each other simultaneously in several markets [or businesses]'. Multipoint competition, provide multi-business firms with strong market power, multipoint rivals usually consider a balance of power as an attractive alternative to hyper-competition. Accordingly, the theory of multipoint competition suggests that mutual forbearance may reduce the business level intensity of competition between two firms when they simultaneously compete in several markets. In a multipoint competition scenario however, more common markets provide more areas for retaliation against competitive attacks.
