Mergers, Mavericks, and Tacit Collusion

Donja Darai, Catherine Roux and Frédéric Schneider
Authors registered in the RePEc Author Service: Friedrich Georg Schneider () and Frédéric Schneider

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We study whether firms’ collusive ability influences their incentives to merge: when tacit collusion is unsuccessful, firms may merge to reduce competitive pressure. We run a series of Bertrand oligopoly experiments where the participants decide whether, when, and to whom they send merger bids. Our experimental design allows us to observe (i) when and to whom mergers are proposed, (ii) when and by whom merger offers are accepted, and (iii) the effect on prices when mergers occur in this way. Our findings suggest that firms send more merger offers when prices are closer to marginal costs. Maverick firms that cut prices and thereby fuel competition are the predominant (but reluctant) receivers of these offers.

Keywords: Tacit collusion; Mavericks; Bertrand oligopoly; Experiments (search for similar items in EconPapers)
JEL-codes: C91 D43 K21 L13 L41 (search for similar items in EconPapers)
Date: 2019-09-17
New Economics Papers: this item is included in nep-bec, nep-com, nep-exp, nep-ind, nep-law and nep-ore
Note: fgs27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Mergers, mavericks, and tacit collusion (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1984

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