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Mergers, Asymmetries and Collusion: Experimental Evidence

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Author Info
MiguelA. Fonseca
Hans-Theo Normann

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Abstract

We analyse the impact of mergers in experimental Bertrand-Edgeworth oligopolies. Treatment variables are the number of firms (two, three) and the distribution of industry capacity (symmetric, asymmetric). Consistent with a dynamic collusion model, we find that, even though they are more concentrated, asymmetric markets exhibit lower prices than symmetric markets with the same number of firms. Consistent with the static Nash prediction, duopolies charge higher prices than triopolies when we control for (a)symmetry. The overall impact of a merger (which comprises both fewer firms and an asymmetry) is anti-competitive but the price increase is not significant. Copyright © 2008 The Author(s).

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2007.02126.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 118 (2008)
Issue (Month): 527 (03)
Pages: 387-400
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Handle: RePEc:ecj:econjl:v:118:y:2008:i:527:p:387-400

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  1. Andreas Nicklisch, 2008. "Semi-collusive advertising and pricing in experimental duopolies," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_25, Max Planck Institute for Research on Collective Goods. [Downloadable!]
  2. Leufkens, Kasper & Peeters, Ronald, 2008. "Price dynamics and collusion under short-run price commitments," Research Memoranda 052, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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