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Partial coordination and mergers among quantity-setting firms

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  • Escrihuela-Villar, Marc

Abstract

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.

Suggested Citation

  • Escrihuela-Villar, Marc, 2008. "Partial coordination and mergers among quantity-setting firms," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 803-810, May.
  • Handle: RePEc:eee:indorg:v:26:y:2008:i:3:p:803-810
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    References listed on IDEAS

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    1. Cheung, Francis K., 1992. "Two remarks on the equilibrium analysis of horizontal merger," Economics Letters, Elsevier, vol. 40(1), pages 119-123, September.
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    7. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
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    9. Verboven, Frank, 1997. "Collusive behavior with heterogeneous firms," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 121-136, May.
    10. Lynda Oswald & Valerie Suslow & Margaret Levenstein & Manuel Pastor, 2003. "International Price-Fixing Cartels and Developing Countries: A Discussion of Effects and Policy Remedies," Working Papers wp53, Political Economy Research Institute, University of Massachusetts at Amherst.
    11. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    12. 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.
    13. Osborne, Dale K, 1976. "Cartel Problems," American Economic Review, American Economic Association, vol. 66(5), pages 835-844, December.
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    Cited by:

    1. Stefano Colombo, 2016. "Mixed oligopolies and collusion," Journal of Economics, Springer, vol. 118(2), pages 167-184, June.
    2. repec:agr:journl:v:1(590):y:2014:i:1(590):p:7-26 is not listed on IDEAS
    3. Marc Escrihuela-Villar & Jorge Guillén, 2014. "On The Sustainability Of Collusion In A Differentiated Oligopoly With A Cartel And A Fringe," Bulletin of Economic Research, Wiley Blackwell, vol. 66(S1), pages 132-137, December.
    4. Keisuke Hattori & Lin Ming Hsin, 2014. "Complementary Alliances in Composite Good Markets with Network Structure," Manchester School, University of Manchester, vol. 82(1), pages 33-51, January.
    5. Marc Escrihuela-Villar & Jorge Guillén, 2014. "On the Relationship Between Innovation and Product Market Competition," The Japanese Economic Review, Japanese Economic Association, vol. 65(4), pages 543-557, December.
    6. Roman Inderst & Frank Maier-Rigaud & Ulrich Schwalbe, 2013. "Umbrella Effects," Working Papers 2013-ECO-17, IESEG School of Management.
    7. Escrihuela-Villar, Marc, 2011. "On Welfare Effects Of Horizontal Mergers With Product Differentiation," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 16(30), pages 7-12.
    8. Iwan Bos & Joseph E. Harrington, Jr, 2010. "Endogenous cartel formation with heterogeneous firms," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 92-117.
    9. Marc Escrihuela-Villar & Jorge Guillen, 2011. "On Collusion and Industry Size," Annals of Economics and Finance, Society for AEF, vol. 12(1), pages 31-40, May.
    10. Marc Escrihuela-Villar, 2013. "On merger in a collusive Stackelberg market," Economics Bulletin, AccessEcon, vol. 33(3), pages 2394-2401.
    11. Marc Escrihuela-Villar, 2016. "On the price effects of collusion and the number of firms," Economics Bulletin, AccessEcon, vol. 36(3), pages 1694-1704.
    12. Darong DAI & Kunrong SHEN, 2014. "Stochastic evolutionary cartel formation," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(590)), pages 7-26, January.
    13. Escrihuela-Villar Marc, 2016. "On Merger Profitability and the Intensity of Rivalry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1203-1212, April.

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