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Asymmetric Collusion and Merger Policy

  • 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)

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.

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File URL: http://www.porto.ucp.pt/feg/repec/WP/152007%20-%20Ganslandt%20Persson%20and%20Vasconcelos%20-%20Asymmetric%20collusion%20and%20merger%20policy.pdf
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Paper provided by Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto) in its series Working Papers de Economia (Economics Working Papers) with number 15.

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Length: 31 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:cap:wpaper:152007
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  1. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  2. Norbäck, Pehr-Johan & Persson, Lars, 2006. "Entrepreneurial Innovations, Competition and Competition Policy," Working Paper Series 670, Research Institute of Industrial Economics, revised 05 May 2010.
  3. 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, 03.
  4. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," CEPR Discussion Papers 2302, C.E.P.R. Discussion Papers.
  5. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  6. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
  7. Persson, Lars & Horn, Henrik, 1998. "Endogenous Mergers in Concentrated Markets," Working Paper Series 513, Research Institute of Industrial Economics.
  8. Rothschild, R., 1999. "Cartel stability when costs are heterogeneous," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 717-734, July.
  9. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  10. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  11. Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
  12. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  13. Helder Vasconcelos, 2005. "Tacit Collusion, Cost Asymmetries, and Mergers," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 39-62, Spring.
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