MERGERS IN A PARTIALLY CARTELIZED MARKET

The paper studies a Partial Cartel model where only a subset of firms colludes. In this model, firms' ability to collude depends on the discount factor. In addition, as hardly any attention has been given by the literature to the case where mergers take place in a collusive framework, the purpose of this paper is to analyze the competitive effects of horizontal mergers on profits and welfare in a Partially Cartelized market. We show that both mergers among fringe and cartel firms increase market price. Regarding merger profitability, the discount factor decreases cartel members' merger profitability. However, the higher cartel members' discount factor, the more fringe firms will be willing to merge. An example of this could be the intense wave of mergers among oil firms that coincided with a large period of high oil prices caused by the OPEC production cuts.collusion, partial cartels, trigger strategies

A note on cartel stability and endogenous sequencing with tacit collusion.

We use the concept of cartel stability defined by d'Aspremont et al. (1983) to obtain that the sequence of play between the cartel and the fringe affects cartel stability in a quantity-competition setting where firms tacitly collude. We also prove that an endogenous sequence of play between a cartel and a fringe depends on the discount factor. If the discount factor is large enough, the cartel and the fringe simultaneously choose quantities since the stable cartel may contain more firms under simultaneous play than under cartel leadership. This is due to the fact that under simultaneous play cartel firms have incentives to participate in the cartel because otherwise no collusion is possible.Collusion; Cartel stability; Stackelberg leadership

Innovation and market concentration with asymmetric firms

This paper considers a theoretical model of n asymmetric firms that reduce their initial unit costs by spending on R&D activities. In accordance with Schumpeterian hypotheses we obtain that more efficient (bigger) firms spend more in R&D and this leads to a more concentrated market structure. We also find a positive relationship between innovation and market concentration. This calls for a corrective tax on R&D activities to curtail strategic incentives to over-invest in R&D trying to achieve a higher market share. Klassifikation: L11, L52, O31 . February, 2004

Cartel Sustainability and Cartel Stability

The paper studies how does the size of a cartel affect the possibility that its members can sustain a collusive agreement. I obtain that collusion is easier to sustain the larger the cartel is. Then, I explore the implications of this result on the incentives of firms to participate in a cartel. Firms will be more willing to participate because otherwise, they risk that collusion completely collapses, as remaining cartel members are unable to sustain collusion.Collusion, Partial cartels, Trigger strategies, Optimal punishment

CARTEL SUSTAINABILITY AND CARTEL STABILITY

The paper studies how does the size of a cartel affect the possibility that its members can sustain a collusive agreement. I obtain that collusion is easier to sustain the larger the cartel is. Then, I explore the implications of this result on the incentives of firms to participate in a cartel. Firms will be more willing to participate because otherwise, they risk that collusion completely collapses, as remaining cartel members are unable to sustain collusion.Collusion, Partial Cartels, Trigger strategies, Optimal Punishment.

ON WELFARE EFFECTS OF HORIZONTAL MERGERS WITH PRODUCT DIFFERENTIATION

We use a non-spatial (Chamberlinian) product differentiation model to analyze the welfare effects of horizontal mergers with quantity competition. We argue that(i) mergers can be welfare enhancing if the degree of product differentiation increases after the merger; and,(ii) privately profitable mergers can also increase welfare. Consequently, in this paper we demonstrate that the degree of product differentiation is a crucial factor to assess the welfare effects of a merger.Horizontal mergers; product differentiation; welfare.

Does cartel leadership facilitate collusion?

We discuss the implications of a Stackelberg sequence of play between a cartel and the fringe. We consider two different approaches to collusion: (i) one-stage static model and (ii) a multi-period oligopoly model. Our main result is that in the static model with quantity-setting firms a stable cartel only exist when cartel firms behave as a Stackelberg leader. It is also shown that in the supergame approach the cartel is always more easily sustained with the leadership than in the simultaneous-moves game. The opposite result is obtained in a price-setting supergame with differentiated products.Collusion; Leadership; Stability; Sustainability

MERGERS IN ASYMMETRIC STACKELBERG MARKETS

It is well known that the profitability of horizontal mergers with quantity competition is scarce. However, in an asymmetric Stackelberg market we obtain that some mergers are profitable. Our main result is that mergers among followers become profitable when the followers are inefficient enough. In this case, leaders reduce their output when followers merge and this reduction renders the merger profitable. This merger increases price and welfare is reduced.Mergers; Asymmetries; Stackelberg.

Mergers in Asymmetric Stackelberg Markets

It is well known that the profitability of horizontal mergers with quantity competition is scarce. However, in an asymmetric Stackelberg market we obtain that some mergers are profitable. Our main result is that mergers among followers become profitable when the followers are inefficient enough. In this case, leaders reduce their output when followers merge and this reduction renders the merger profitable. This merger increases price and welfare is reduced.Mergers, Asymmetries, Stackelberg

On welfare effects of horizontal mergers with product differentiation

We use a non-spatial (Chamberlinian) product differentiation model to analyze the welfare effects of horizontal mergers with quantity competition. We argue that (i) mergers can be welfare enhancing if the degree of product differentiation increases after the merger; and (ii) privately profitable mergers can also increase welfare. Consequently in this paper we demonstrate that the degree of product differentiation is a crucial factor to assess the welfare effects of a merger.En este artículo usamos el modelo de diferenciación no-espacial de producto (Chamberliniano) para analizar los efectos benéficos en las adquisiciones empresariales horizontales con cantidad de competencia. Aquí argumentamos que (i) las adquisiciones empresariales pueden ser promovedoras del beneficio si el grado de diferenciación de productos aumenta después de la absorción; y (ii) las adquisiciones privadas lucrativas también pueden beneficiosas. Consecuentemente esteartículo demuestra que el grado de diferenciación de producto es un factor crucial para evaluar los efectos benéficos de una adquisición empresaria