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Tacit versus Overt Collusion Firm Asymmetries and Numbers: What’s the Evidence?

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Author Info

  • Stephen Davies

    () (Centre for Competition Policy, University of East Anglia)

  • Matthew Olczak

    () (Centre for Competition Policy, University of East Anglia)

Abstract

It is conventional wisdom that collusion is more likely the fewer firms there are in a market and the more symmetric they are. This is often theoretically justified in terms of a repeated non-cooperative game. Although that model fits more easily with tacit than overt collusion, the impression sometimes given is that ‘one model fits all’. Moreover, the empirical literature offers few stylised facts on the most simple of questions – how few are few and how symmetric is symmetric? This paper attempts to fill this gap while also exploring the interface of tacit and overt collusion, albeit in an indirect way. First, it identifies the empirical model of tacit collusion that the European Commission appears to have employed in coordinated effects merger cases – apparently only fairly symmetric duopolies fit the bill. Second, it shows that, intriguingly, the same story emerges from the quite different experimental literature on tacit collusion. This offers a stark contrast with the findings for a sample of prosecuted cartels; on average, these involve six members (often more) and size asymmetries among members are often considerable. The indirect nature of this ‘evidence’ cautions against definitive conclusions; nevertheless, the contrast offers little comfort for those who believe that the same model does, more or less, fit all.

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Bibliographic Info

Paper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 08-32.

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Length: 26 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:ccp:wpaper:wp08-32

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Keywords: tacit collusion; collective dominance; coordinated effects; cartels; European mergers; asymmetries; firm numbers;

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Cited by:
  1. Longo, R & Miraldo, M & Street, A, 2009. "Price regulation of pluralistic markets subject to provider collusion," Working Papers 1454, Imperial College, London, Imperial College Business School.
  2. Iwan Bos & Ronald Peeters & Erik Pot, 2013. "Do antitrust agencies facilitate meetings in smoke-filled rooms?," Applied Economics Letters, Taylor and Francis Journals, vol. 20(6), pages 611-614, April.
  3. 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).

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