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Asymmetric Cartels - a Theory of Ring Leaders

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  • Persson, Lars
  • Ganslandt, Mattias
  • Vasconcelos, Helder

Abstract

Many convicted cartels have a leader which is substantially larger than its rivals. In a setting where firms face indivisible costs of collusion, we show that: (i) firms may have an incentive to merge so as to create asymmetric market structures since this enables the merged firm to cover the indivisible cost associated with cartel leadership; and (ii) forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion. Thus, these results have implications for the practice of the current EU and US merger policies.

Suggested Citation

  • Persson, Lars & Ganslandt, Mattias & Vasconcelos, Helder, 2008. "Asymmetric Cartels - a Theory of Ring Leaders," CEPR Discussion Papers 6829, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6829
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics.
    2. de Mesnard, Louis, 2009. "Is the French mobile phone cartel really a cartel?," International Journal of Production Economics, Elsevier, vol. 122(2), pages 663-677, December.
    3. Iwan Bos & Frederick Wandschneider, 2011. "Cartel Ringleaders and the Corporate Leniency Program," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2011-13, Centre for Competition Policy, University of East Anglia, Norwich, UK..

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    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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