Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 719: Asymmetric Collusion and Merger Policy

Mattias Ganslandt (), Lars Persson () and Helder Vasconcelos
Additional contact information
Mattias Ganslandt: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Lars Persson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Helder Vasconcelos: IGIER, Università Bocconi, Postal: Via Salasco 5, 20136 Milano, Italy

Abstract: In their merger control, EU and the US have considered symmetric size distribution (cost structure) of firms to be a factor potentially leading to collusion. We show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with higher risk of collusion, when firms face indivisible costs of collusion. In particular, we show that if the rule determining the collusive outcome has the property that the large (efficient) firm benefits sufficiently more from collusion when industry asymmetries increase, collusion can become more likely when firms are moderately asymmetric.

Keywords: Collusion; Cost Asymmetries; Merger Policy

JEL-codes: D43; L41

31 pages, September 27, 2007

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