Mergers, Cartels and Leniency Programs: The Role of Production Capacities
GATE Working Paper No. 08-14
33 Pages Posted: 4 Jun 2008 Last revised: 15 Apr 2011
Date Written: May 1, 2008
In this paper, we study the impact of a merger on collusion depending on the endowment of capital asset among firms. We show that the merger makes the collusion easier to sustain when asymmetric capital stock combines with less efficient insiders because of more symmetric conditions and closer incentive constraints. Moreover, this model allows us to determine an optimal threshold of asymmetry among insiders and outsiders such as a merger has pro-competitive effects and we compare this value with the value which would restore perfect symmetry between firms after the merger.
Keywords: leniency programs, merger, oligopoly supergame
JEL Classification: K42, L11, L41
Suggested Citation: Suggested Citation