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Mergers, Asymmetries and Collusion: Experimental Evidence

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  • MiguelA. Fonseca
  • Hans-Theo Normann

Abstract

We analyse the impact of mergers in experimental Bertrand-Edgeworth oligopolies. Treatment variables are the number of firms (two, three) and the distribution of industry capacity (symmetric, asymmetric). Consistent with a dynamic collusion model, we find that, even though they are more concentrated, asymmetric markets exhibit lower prices than symmetric markets with the same number of firms. Consistent with the static Nash prediction, duopolies charge higher prices than triopolies when we control for (a)symmetry. The overall impact of a merger (which comprises both fewer firms and an asymmetry) is anti-competitive but the price increase is not significant. Copyright © 2008 The Author(s).

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  • MiguelA. Fonseca & Hans-Theo Normann, 2008. "Mergers, Asymmetries and Collusion: Experimental Evidence," Economic Journal, Royal Economic Society, vol. 118(527), pages 387-400, March.
  • Handle: RePEc:ecj:econjl:v:118:y:2008:i:527:p:387-400
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