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Mergers, cartels and leniency programs: The role of capital stocks

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  • Emilie, Dargaud

Abstract

This paper examines the impact of mergers on collusion, depending on the endowment of capital assets among firms. We show that mergers render collusion easier to sustain when an asymmetric capital stock is combined with less-efficient insiders, due to more symmetric conditions and tighter incentive constraints. Moreover, the model allows us to determine an optimal threshold of asymmetry between insiders and outsiders such that mergers have pro-competitive effects; we compare this value with that which would generate perfect symmetry between firms after the merger.

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  • Emilie, Dargaud, 2010. "Mergers, cartels and leniency programs: The role of capital stocks," Research in Economics, Elsevier, vol. 64(1), pages 45-57, March.
  • Handle: RePEc:eee:reecon:v:64:y:2010:i:1:p:45-57
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    References listed on IDEAS

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    1. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    2. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
    3. repec:adr:anecst:y:1997:i:46:p:09 is not listed on IDEAS
    4. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    5. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    6. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-187, June.
    7. Helder Vasconcelos, 2005. "Tacit Collusion, Cost Asymmetries, and Mergers," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 39-62, Spring.
    8. Rothschild, R., 1999. "Cartel stability when costs are heterogeneous," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 717-734, July.
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    Cited by:

    1. Bougette, Patrice, 2010. "Preventing merger unilateral effects: A Nash-Cournot approach to asset divestitures," Research in Economics, Elsevier, vol. 64(3), pages 162-174, September.

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    Keywords

    Mergers Collusion Leniency programs;

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