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Partial coordination and mergers among quantity-setting firms

  • Escrihuela-Villar, Marc

We analyze horizontal mergers in a collusive environment by using an infinitely repeated game where (i) a subset of collusive firms is exogenously given and (ii) partially collusive arrangements are allowed for. We show that, in our model, there is no clear relation between the existence of mergers and full collusion at equilibrium. However, we demonstrate that the presence of mergers generally leads to a price increase. Also, we show that cartel firms have less incentives to merge than firms in a Cournot oligopoly, and that collusion increases fringe firms' incentives to merge.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 26 (2008)
Issue (Month): 3 (May)
Pages: 803-810

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Handle: RePEc:eee:indorg:v:26:y:2008:i:3:p:803-810
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
  2. d'ASPREMONT, Claude & JACQUEMIN, Alexis & GABSZEWICZ, Jean J. & WEYMARK, John A., . "On the stability of collusive price leadership," CORE Discussion Papers RP -522, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  4. Osborne, Dale K, 1976. "Cartel Problems," American Economic Review, American Economic Association, vol. 66(5), pages 835-44, December.
  5. Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Working Papers 008, Bielefeld University, Center for Mathematical Economics.
  6. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
  7. Margaret Levenstein & Valerie Suslow & Lynda Oswald, 2003. "International Price-Fixing Cartels and Developing Countries: A Discussion of Effects and Policy Remedies," NBER Working Papers 9511, National Bureau of Economic Research, Inc.
  8. Margaret Levenstein & Valerie Suslow & Lynda Oswald, 2003. "International Price-Fixing Cartels and Developing Countries: A Discussion of Effects and Policy Remedies," William Davidson Institute Working Papers Series 538, William Davidson Institute at the University of Michigan.
  9. Huck, Steffen & Konrad, Kai A. & Muller, Wieland, 2001. "Big fish eat small fish: on merger in Stackelberg markets," Economics Letters, Elsevier, vol. 73(2), pages 213-217, November.
  10. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  11. Verboven, Frank, 1997. "Collusive behavior with heterogeneous firms," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 121-136, May.
  12. Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-27, June.
  13. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  14. Cheung, Francis K., 1992. "Two remarks on the equilibrium analysis of horizontal merger," Economics Letters, Elsevier, vol. 40(1), pages 119-123, September.
  15. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
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