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16 Eur. Competition J. 512 (2020)
Can Mergers Lead to Partial Collusion? Introducing Heterogeneous Discount Factors to a Bertrand-Edgeworth Model

handle is hein.journals/eurcompet16 and id is 512 raw text is: EUROPEAN COMPETITION JOURNAL Routledge 2020, VOL. 16, NOS. 2-3, 512-530 https://doi.org/10.1080/17441056.2020.1816335 Taylor &Francis Group Can mergers lead to partial collusion? Introducing heterogeneous discount factors to a Bertrand- Edgeworth model Jens T. Grub . Scientific Staff Member, Department of Microeconomics, University of Hohenheim, Stuttgart, Germany 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. ARTICLE HISTORY Received 9 June 2020; Accepted 26 August 2020 KEYWORDS Coordinated effects; mergers; non-coordinated effects; partial collusion; umbrella effects 1. Introduction A merger can induce anti-competitive effects by lowering the intensity of competition in a market such that firms may charge higher prices even if they do not coordinate their behaviour. This effect is known as the non- coordinated effect of a merger. However, a merger may also cause coordi- nated effects where firms form a cartel post-merger. Both effects may even occur simultaneously. This can happen if collusion is partial in the sense that not all firms in a market are included. Partial cartels are one form of partial collusion and are characterized by only some firms that are part of the cartel while the outsiders react to the increased prices charged by the cartel members by raising their prices as well, causing so-called umbrella effects. Similarly, some firms may tacitly collude while other firms continue to behave non-cooperatively. CONTACT Jens T. Grub j.grueb@uni-hohenheim.de - Universitst Hohenheim, Institut fOr Volks- wirtschaftslehre, Lehrstuhl fOr Mikrookonomik (520C), 70593 Stuttgart, Germany © 2020 Informa UK Limited, trading as Taylor & Francis Group

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