The Coordinated Effect of a Merger When Firms Share Collusion Gains Fairly

29 Pages Posted: 30 Sep 2013 Last revised: 29 Jun 2015

See all articles by Pierluigi Sabbatini

Pierluigi Sabbatini

Government of the Italian Republic (Italy) - Italian Competition Authority

Date Written: June 29, 2015

Abstract

It is hard to assess the coordinated effect of mergers in solid and convincing fashion, in part because economic theory deals mainly with the sustainability of tacit collusion and generally does not explore the conditions that foster collusion in the first place. Assuming that in order to collude, firms demand the fair sharing of collusive gains, we exploit the egalitarian property of grim trigger strategies, when all incentive compatibility constraints are binding. This approach suggests using three indicators to determine whether and how a merger affects the probability of collusion. An example of application of this approach to a real-world case (the AT&T/T-Mobile merger) is provided.

Keywords: merger control, coordinated effect, Horizontal Merger Guidelines, parallel behavior, grim trigger strategies, Balanced Temptation Equilibrium, collusive sets

JEL Classification: C15, C78, K21, L21, L49

Suggested Citation

Sabbatini, Pierluigi, The Coordinated Effect of a Merger When Firms Share Collusion Gains Fairly (June 29, 2015). Available at SSRN: https://ssrn.com/abstract=2333367 or http://dx.doi.org/10.2139/ssrn.2333367

Pierluigi Sabbatini (Contact Author)

Government of the Italian Republic (Italy) - Italian Competition Authority ( email )

Piazza Verdi 6/a
00187 Roma, 00198
Italy
0039 0685821369 (Phone)
0039 0685452369 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
110
Abstract Views
636
rank
345,380
PlumX Metrics