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Economica

Endogenous Mergers and Collusion in Asymmetric Market Structures

Scientific Article in English
Reference
Ganslandt, Mattias, Lars Persson and Helder Vasconcelos (2012). “Endogenous Mergers and Collusion in Asymmetric Market Structures”. Economica 79(316), 766–791. doi.org/10.1111/j.1468-0335.2012.00937.x

Authors
Mattias Ganslandt, Lars Persson, Helder Vasconcelos

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.