Mergers, Asymmetries and Collusion: Experimental Evidence

Miguel Fonseca and Hans-Theo Normann

Economic Journal, 2008, vol. 118, issue 527, 387-400

Abstract: We analyse the impact of mergers in experimental Bertrand-Edgeworth oligopolies. Treatment variables are the number of firms (two, three) and the distribution of industry capacity (symmetric, asymmetric). Consistent with a dynamic collusion model, we find that, even though they are more concentrated, asymmetric markets exhibit lower prices than symmetric markets with the same number of firms. Consistent with the static Nash prediction, duopolies charge higher prices than triopolies when we control for (a)symmetry. The overall impact of a merger (which comprises both fewer firms and an asymmetry) is anti-competitive but the price increase is not significant. Copyright © 2008 The Author(s).

Date: 2008
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