Mergers, Asymmetries and Collusion: Experimental Evidence
Miguel Alexandre Fonseca
University of London - Department of Economics
Heinrich Heine University Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods
Economic Journal, Vol. 118, March 2008
We analyze the impact of mergers in experimental Bertrand-Edgeworth oligopolies. Treatment variables are the number of firms (two, three) and the distribution of industry capacity (symmetric, asymmetric). Consistent with a dynamic collusion model, we find that, even though they are more concentrated, asymmetric markets exhibit lower prices than symmetric markets with the same number of firms. Consistent with the static Nash prediction, duopolies charge higher prices than triopolies when we control for (a)symmetry. The overall impact of a merger (which comprises both fewer firms and an asymmetry) is anti-competitive but the price increase is not significant.
Number of Pages in PDF File: 26
Keywords: asymmetries, collective dominance, coordinated effects, mergers, unilateral effects
JEL Classification: C72, C90, D43, G34
Date posted: September 5, 2007 ; Last revised: July 15, 2008
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