Mergers and Collusion with Asymmetric Capacities
Documents De Travail Working Paper No. 07-08
19 Pages Posted: 24 May 2007 Last revised: 11 May 2010
Date Written: March 1, 2007
When it examines the risk of coordinated effects, an antitrust authority will usually compare the situation where the merger is accepted with an attendant risk of collusion with the benchmark case in which competition is present ex-post. The main objective of this paper is to show that the antitrust authority must take into account the possibility for firms to collude if a merger is rejected. In fact, firms can have incitations to make collusion ex-post (after a rejection of a merger) whereas they would not make collusion ex-ante. All the papers on mergers and collusion tend to look at a minimal discount factor threshold for collusion to be sustained. This article does not only suggest necessary and sufficient conditions for collusion to be enforced but it also analyses the choice which firms have as to whether to collude. We consider an industry with cost-asymmetric firms and we study the analysis of collusion under leniency programmes.
Keywords: leniency programme, merger, oligopoly supergame
JEL Classification: K42, L11, L41
Suggested Citation: Suggested Citation