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Asymmetric Collusion and Merger Policy

Author

Listed:
  • Mattias Ganslandt

    (Research Institute of Industrial Economics (IFN))

  • Lars Persson

    (Research Institute of Industrial Economics (IFN) and CEPR)

  • Helder Vasconcelos

    (Universidade Católica Portuguesa - Porto, and CEPR)

Abstract

In their merger control, EU and the US have considered symmetric size distribution (cost structure) of firms to be a factor potentially leading to collusion. We show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with higher risk of collusion, when firms face indivisible costs of collusion. In particular, we show that if the rule determining the collusive outcome has the property that the large (efficient) firm benefits sufficiently more from collusion when industry asymmetries increase, collusion can become more likely when firms are moderately asymmetric.

Suggested Citation

  • Mattias Ganslandt & Lars Persson & Helder Vasconcelos, 2007. "Asymmetric Collusion and Merger Policy," Working Papers de Economia (Economics Working Papers) 15, Católica Porto Business School, Universidade Católica Portuguesa.
  • Handle: RePEc:cap:wpaper:152007
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    References listed on IDEAS

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    1. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2006. "National versus international mergers in unionized oligopoly," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 212-233, March.
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    7. 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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    More about this item

    Keywords

    Collusion; Cost Asymmetries; Merger Policy;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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