Asymmetric Cartels - a Theory of Ring Leaders
AbstractMany convicted cartels have a leader which is substantially larger than its rivals. In a setting where firms face indivisible costs of collusion, we show that: (i) firms may have an incentive to merge so as to create asymmetric market structures since this enables the merged firm to cover the indivisible cost associated with cartel leadership; and (ii) forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion. Thus, these results have implications for the practice of the current EU and US merger policies.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6829.
Date of creation: May 2008
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Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-31 (All new papers)
- NEP-BEC-2008-05-31 (Business Economics)
- NEP-COM-2008-05-31 (Industrial Competition)
- NEP-IND-2008-05-31 (Industrial Organization)
- NEP-MIC-2008-05-31 (Microeconomics)
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