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. Ordering information: This article can be ordered from https://pubs3.rand.org/cgi-bin/rje/pdf.cgi.
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Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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