1 Multimarket Contacts, Profits and Market Power: Evidence from Leasing Marta Degl’Innocenti * , Claudia Girardone † and Giuseppe Torluccio ‡ This version: 7th November 2012 Please do not quote Abstract This paper examines the competitive dynamics and multimarket characteristics of the leasing industry in Italy. We employ a GMM-system estimator for dynamic panel analysis using a unique dataset over 2002-2008. Our main findings suggest that there is no evidence of tacit collusion in the Italian leasing sector thus rejecting the hypothesis that mutual forbearance affects market conditions through greater multimarket contact. The study also offers no support to the assumption that similarity among firms facilitates collusive behaviour. Finally, the analysis reveals that on average the most profitable leasing firms are less diversified, more cost efficient and hold a greater level of capital. JEL Classification: C23, G23, L2. Keywords: Multimarket contact; Profitability; Leasing Industry; Dynamic Panel Data; Lerner Index of Monopoly Power. * Corresponding author: Department of Management, University of Southampton, Highfield Southampton, SO17 1BJ, United Kingdom. Tel. +44 (023) 8059 8093; Fax +44 (023) 8059 3844; Email: M.Deglinnocenti@soton.ac.uk. † Essex Business School, University of Essex, Wivenhoe Park, Colchester, CO4 3SQ, United Kingdom. Tel: +44 1206 874156; Fax +44 1206 8 73429; Email: cgirardone@essex.ac.uk. ‡ Department of Management, University of Bologna, Via Capo di Lucca, 34, 40126 Bologna, Italy. Tel. +39 051 2098085; fax +39 051 6390612; Email: giuseppe.torluccio@unibo.it .