Entry in Collusive Markets: An Experimental Study

In this paper we present an experiment in which we test the effects of sequential entry on the stability of collusion in oligopoly markets. Theoretical as well as experimental research suggests that a larger number of firms in an industry makes collusion harder to sustain. In this study, we explore to what extent collusion can be upheld with exogenous entry when groups start off small and when it is common knowledge that the entrant is informed about the history of her group prior to entry. We find that collusion is indeed easier to sustain in the latter case than in groups starting large. We conjecture that an implicit coordination problem is resolved more easily in a smaller group and that coordination, once it has been established, can be transferred to the enlarged group by means of a common code of conduct. Moreover, the results suggest that entrants emulate the behavior of their group upon entry

Entry in Collusive Markets: An Experimental Study

In this paper we present an experiment in which we test the effects of sequential entry on the stability of collusion in oligopoly markets. Theoretical as well as experimental research suggests that a larger number of firms in an industry makes collusion harder to sustain. In this study, we explore to what extent collusion can be upheld with exogenous entry when groups start off small and when it is common knowledge that the entrant is informed about the history of her group prior to entry. We find that collusion is indeed easier to sustain in the latter case than in groups starting large. We conjecture that an implicit coordination problem is resolved more easily in a smaller group and that coordination, once it has been established, can be transferred to the enlarged group by means of a common code of conduct. Moreover, the results suggest that entrants emulate the behavior of their group upon entry.Collusion; Entry; Experiments

Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index

This paper introduces the Werden-Froeb Index (WFI) to assist in evaluating merger-specific efficiencies in horizontal mergers. The index measures the weighted average reduction in marginal costs required to restore pre-merger equilibrium prices and quantities after the (full or partial) merger is consummated. The WFI is well defined, objective and robust, and it has relatively low information requirements. We propose to use the index as a natural complement to concentration measures such as the Hirschmann-Herfindahl Index in the assessment of horizontal mergers. This discussion paper has resulted in a publication in The Journal of Industrial Economics , 56(4), 778-808.Merger control; efficiency defense; index; HHI

Cost and Benefits of Merger Control: An Applied Game Theoretic Perspective -super-*

This paper discusses how simulation models based on game-theoretic foundations can be used to arrive at an estimate of the net benefits of the merger control legislation. We illustrate our method using the Dutch new merger control legislation that was introduced in 1998. We analyse the effects of proposed mergers in four markets where 26 firms are operating and use a sample period of 5 years. Based on the results of these cases and using a cost benefit analysis, we estimate the net benefits of Dutch merger control at about a little more than €100 million a year during the first five years of merger control in The Netherlands. Copyright 2006 Blackwell Publishing Ltd..