Can mergers lead to partial collusion? Introducing heterogeneous discount factors to a Bertrand-Edgeworth model

Jens T. Grüb

European Competition Journal, 2020, vol. 16, issue 2-3, 512-530

Abstract: This paper studies whether mergers may lead to partial collusion where some firms collude and some firms behave competitively. Such mergers have the potential to induce simultaneous coordinated and non-coordinated effects. We use a Bertrand-Edgeworth model with heterogeneous discount factors to derive conditions for profitable and stable collusion and provide a numerical example. Mergers that change the market structure in a way such that maverick firms are eliminated or a set of firms reach a critical share in total capacity can lead to partial collusion.

Date: 2020
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DOI: 10.1080/17441056.2020.1816335

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