Asymmetric Cartels - a Theory of Ring Leaders

Mattias Ganslandt, Lars Persson and Helder Vasconcelos ()

No 6829, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 (search for similar items in EconPapers)
JEL-codes: D43 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mic and nep-reg
Date: 2008-05

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