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Tacit Collusion, Cost Asymmetries, and Mergers

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Author Info

  • Helder Vasconcelos

    ()
    (Universita` Bocconi)

Abstract

This article contributes to the analysis of tacit collusion in quantity-setting supergames involving cost-asymmetric firms. Asymmetry is dealt with by assuming that firms have a different share of a specific asset that affects marginal costs. The model extends optimal punishment schemes in the style of Abreu (1986, 1988) and provides conditions for industrywide collusion to be enforced. From the analysis of the impact of asset transfers on the sustainability of tacit collusion, merger policy implications can be drawn. In particular, I show that if the merger induces an increase in the inequality of asset holdings, this will hinder collusion.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 36 (2005)
Issue (Month): 1 (Spring)
Pages: 39-62

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Handle: RePEc:rje:randje:v:36:y:2005:1:p:39-62

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Related research

Keywords: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance Market Structure; Firm Strategy; and Market Performance: Monopoly; Monopolization Strategies (cartels; collusion) Market Structure; Firm Strategy; and Market Performance: Oligopoly and Other Imperfect Markets; monopolistic competition; contestable markets Collusion; Firm; Firms; Merger; Shares;

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Cited by:
  1. Jan Boone & Delia Ionascu & Kresimir Zigic, 2006. "Trade Policy, Market Leaders and Endogenous Competition Intensity," CERGE-EI Working Papers wp311, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Johannes Paha, 2010. "Simulation and Prosecution of a Cartel with Endogenous Cartel Formation," MAGKS Papers on Economics 201007, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  3. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Competition Policy Center, Working Paper Series qt9pt7p9bm, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  4. Benjamin Bridgman, 2011. "Competition, Work Rules and Productivity," 2011 Meeting Papers 289, Society for Economic Dynamics.
  5. Billette de Villemeur, Etienne & Flochel, Laurent & Versaevel, Bruno, 2012. "Optimal collusion with limited liability," MPRA Paper 38481, University Library of Munich, Germany.
  6. Darong DAI & Kunrong SHEN, 2014. "Stochastic evolutionary cartel formation," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(590)), pages 7-26, January.
  7. Olivier Dagnelie, 2008. "Inequality and a Repeated Joint Project," UFAE and IAE Working Papers 740.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  8. Packalen, Mikko & Sen, Anindya, 2013. "Static and dynamic merger effects: A market share based empirical analysis," International Review of Law and Economics, Elsevier, vol. 36(C), pages 12-24.
  9. Yasuhiko Nakamura, 2011. "Strategic managerial delegation and cross-border mergers," Journal of Economics, Springer, vol. 104(1), pages 49-89, September.
  10. Ma, K., 2013. "Essays on financial fragility and regulation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5930085, Tilburg University.
  11. António Brandão & Joana Pinho & Hélder Vasconcelos, 2013. "Asymmetric collusion with growing demand," FEP Working Papers 510, Universidade do Porto, Faculdade de Economia do Porto.
  12. Ya-Po Yang & Jin-Li Hu, 2012. "Gresham’s law in environmental protection," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(2), pages 103-122, April.
  13. repec:hal:journl:halshs-00194906 is not listed on IDEAS
  14. Cheikbossian, Guillaume & Mahenc, Philippe, 2012. "Cooperation in the Presence of an Advantaged Outsider," TSE Working Papers 13-390, Toulouse School of Economics (TSE).

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