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Mergers, cartels and leniency programs: The role of capital stocks

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  • Emilie, Dargaud

Abstract

This paper examines the impact of mergers on collusion, depending on the endowment of capital assets among firms. We show that mergers render collusion easier to sustain when an asymmetric capital stock is combined with less-efficient insiders, due to more symmetric conditions and tighter incentive constraints. Moreover, the model allows us to determine an optimal threshold of asymmetry between insiders and outsiders such that mergers have pro-competitive effects; we compare this value with that which would generate perfect symmetry between firms after the merger.

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Bibliographic Info

Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 64 (2010)
Issue (Month): 1 (March)
Pages: 45-57

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Handle: RePEc:eee:reecon:v:64:y:2010:i:1:p:45-57

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Web page: http://www.elsevier.com/locate/inca/622941

Related research

Keywords: Mergers Collusion Leniency programs;

References

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  1. Lars-Hendrik R�ller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
  2. Rothschild, R., 1999. "Cartel stability when costs are heterogeneous," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 717-734, July.
  3. Thierry PENARD, 1997. "Choix de capacités et comportements stratégiques," Annales d'Economie et de Statistique, ENSAE, issue 46, pages 203-224.
  4. Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
  5. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  6. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-87, June.
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Cited by:
  1. Bougette, Patrice, 2010. "Preventing merger unilateral effects: A Nash-Cournot approach to asset divestitures," Research in Economics, Elsevier, vol. 64(3), pages 162-174, September.

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