DP6829 Asymmetric Cartels - a Theory of Ring Leaders
|Author(s):||Mattias Ganslandt, Lars Persson, Helder Vasconcelos|
|Publication Date:||May 2008|
|Keyword(s):||Cartels, Collusion, Cost Asymmetries, Merger Policy, Ring Leader|
|Programme Areas:||Industrial Organization|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=6829|
Many convicted cartels have a leader which is substantially larger than its rivals. In a setting where firms face indivisible costs of collusion, we show that: (i) firms may have an incentive to merge so as to create asymmetric market structures since this enables the merged firm to cover the indivisible cost associated with cartel leadership; and (ii) forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with a higher risk of collusion. Thus, these results have implications for the practice of the current EU and US merger policies.