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Endogenous Mergers and Collusion in Asymmetric Market Structures
Author(s) -
Ganslandt Mattias,
Persson Lars,
Vasconcelos Helder
Publication year - 2012
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2012.00937.x
Subject(s) - cartel , collusion , incentive , empirical evidence , industrial organization , microeconomics , antisymmetry , market structure , market power , business , merger control , economics , finance , epistemology , monopoly , philosophy , linguistics , commission
Recent empirical evidence shows that cartels are often asymmetric, while cartel theory suggests that firm symmetry is conducive to collusion. Including an indivisible cost of cartelization, we show that medium asymmetric market structures are more conducive to collusion, since they balance the small firms' incentives to stay in the cartel against the need to cover the cartel leaders' indivisible cartelization cost. Using an endogenous merger model, we also show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion. Current antisymmetry merger policy can thus be counterproductive.