Mergers In A Partially Cartelized Market
The paper studies a Partial Cartel model where only a subset of firms colludes. In this model, firms' ability to collude depends on the discount factor. In addition, as hardly any attention has been given by the literature to the case where mergers take place in a collusive framework, the purpose of this paper is to analyze the competitive effects of horizontal mergers on profits and welfare in a Partially Cartelized market. We show that both mergers among fringe and cartel firms increase market price. Regarding merger profitability, the discount factor decreases cartel members' merger profitability. However, the higher cartel members' discount factor, the more fringe firms will be willing to merge. An example of this could be the intense wave of mergers among oil firms that coincided with a large period of high oil prices caused by the OPEC production cuts.
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- Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
- Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
- Huck, Steffen & Konrad, Kai A. & Muller, Wieland, 2001. "Big fish eat small fish: on merger in Stackelberg markets," Economics Letters, Elsevier, vol. 73(2), pages 213-217, November.
- Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, September.