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Tacit versus Overt Collusion Firm Asymmetries and Numbers: What’s the Evidence?

Author

Listed:
  • Stephen Davies

    () (Centre for Competition Policy, University of East Anglia)

  • Matthew Olczak

    () (Centre for Competition Policy, University of East Anglia)

Abstract

It is conventional wisdom that collusion is more likely the fewer firms there are in a market and the more symmetric they are. This is often theoretically justified in terms of a repeated non-cooperative game. Although that model fits more easily with tacit than overt collusion, the impression sometimes given is that ‘one model fits all’. Moreover, the empirical literature offers few stylised facts on the most simple of questions – how few are few and how symmetric is symmetric? This paper attempts to fill this gap while also exploring the interface of tacit and overt collusion, albeit in an indirect way. First, it identifies the empirical model of tacit collusion that the European Commission appears to have employed in coordinated effects merger cases – apparently only fairly symmetric duopolies fit the bill. Second, it shows that, intriguingly, the same story emerges from the quite different experimental literature on tacit collusion. This offers a stark contrast with the findings for a sample of prosecuted cartels; on average, these involve six members (often more) and size asymmetries among members are often considerable. The indirect nature of this ‘evidence’ cautions against definitive conclusions; nevertheless, the contrast offers little comfort for those who believe that the same model does, more or less, fit all.

Suggested Citation

  • Stephen Davies & Matthew Olczak, 2008. "Tacit versus Overt Collusion Firm Asymmetries and Numbers: What’s the Evidence?," Working Papers 08-32, Centre for Competition Policy, University of East Anglia.
  • Handle: RePEc:ccp:wpaper:wp08-32
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    File URL: http://www.ccp.uea.ac.uk/publicfiles/workingpapers/CCP08-32.pdf
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    Citations

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    Cited by:

    1. Axel Sonntag & Daniel John Zizzo, 2015. "Institutional authority and collusion," Southern Economic Journal, Southern Economic Association, vol. 82(1), pages 13-37, July.
    2. António Brandão & Joana Pinho & Hélder Vasconcelos, 2014. "Asymmetric Collusion with Growing Demand," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 429-472, December.
    3. Roberta Longo & Marisa Miraldo & Andrew Street, 2008. "Price regulation of pluralistic markets subject to provider collusion," Working Papers 045cherp, Centre for Health Economics, University of York.
    4. Mouraviev, Igor, 2014. "Explicit Collusion under Antitrust Enforcement," Center for Mathematical Economics Working Papers 494, Center for Mathematical Economics, Bielefeld University.
    5. Bos Iwan & Letterie Wilko & Vermeulen Dries, 2015. "Antitrust as Facilitating Factor for Collusion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(2), pages 797-814, April.
    6. Iwan Bos & Ronald Peeters & Erik Pot, 2013. "Do antitrust agencies facilitate meetings in smoke-filled rooms?," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 611-614, April.
    7. Miraldo, M & Crea, G & Longo, R & Street, A, 2014. "Collusion in regulated pluralistic markets," Working Papers 15402, Imperial College, London, Imperial College Business School.
    8. Garrod, Luke & Olczak, Matthew, 2016. "Collusion, Firm Numbers and Asymmetries Revisited," MPRA Paper 74352, University Library of Munich, Germany.
    9. Malcolm B. Coate & Shawn W. Ulrick, 2016. "Unilateral Effects Analysis in Differentiated Product Markets: Guidelines, Policy, and Change," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(1), pages 45-68, February.
    10. Malcolm Coate & Shawn Ulrick, 2016. "Unilateral Effects Analysis in Differentiated Product Markets: Guidelines, Policy, and Change," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(1), pages 45-68, February.
    11. Johannes Paha, 2010. "Simulation and Prosecution of a Cartel with Endogenous Cartel Formation," MAGKS Papers on Economics 201007, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    tacit collusion; collective dominance; coordinated effects; cartels; European mergers; asymmetries; firm numbers;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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