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Can mergers lead to partial collusion? Introducing heterogeneous discount factors to a Bertrand-Edgeworth model

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  • Jens T. Grüb

Abstract

This paper studies whether mergers may lead to partial collusion where some firms collude and some firms behave competitively. Such mergers have the potential to induce simultaneous coordinated and non-coordinated effects. We use a Bertrand-Edgeworth model with heterogeneous discount factors to derive conditions for profitable and stable collusion and provide a numerical example. Mergers that change the market structure in a way such that maverick firms are eliminated or a set of firms reach a critical share in total capacity can lead to partial collusion.

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  • Jens T. Grüb, 2020. "Can mergers lead to partial collusion? Introducing heterogeneous discount factors to a Bertrand-Edgeworth model," European Competition Journal, Taylor & Francis Journals, vol. 16(2-3), pages 512-530, September.
    • Handle: RePEc:taf:recjxx:v:16:y:2020:i:2-3:p:512-530
    DOI: 10.1080/17441056.2020.1816335
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