Working Paper: CEPR ID: DP6829
Authors: Mattias Ganslandt; Lars Persson; Helder Vasconcelos
Abstract: 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.
Keywords: cartels; collusion; cost asymmetries; merger policy; ring leader
JEL Codes: D43; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| merger (G34) | asymmetric market structure (D43) |
| asymmetric market structure (D43) | collusion (D74) |
| merger policy (G34) | collusion risk (L12) |
| firm size asymmetries (L25) | collusion sustainability (D74) |