Tacit vs. overt collusion firm asymmetries and numbers: what's the evidence?

Stephen Davies, Matthew Olczak

Research output: Contribution to journalArticle

Abstract

It is conventional wisdom that collusion is more likely the fewer firms there are in a market and the more symmetric they are. This is often theoretically justified in terms of a repeated non-cooperative game. Although that model fits more easily with tacit than overt collusion, the impression sometimes given is that ‘one model fits all’. Moreover, the empirical literature offers few stylized facts on the most simple of questions—how few are few and how symmetric is symmetric? This paper attempts to fill this gap while also exploring the interface of tacit and overt collusion, albeit in an indirect way. First, it identifies the empirical model of tacit collusion that the European Commission appears to have employed in coordinated effects merger cases—apparently only fairly symmetric duopolies fit the bill. Second, it shows that, intriguingly, the same story emerges from the quite different experimental literature on tacit collusion. This offers a stark contrast with the findings for a sample of prosecuted cartels; on average, these involve six members (often more) and size asymmetries among members are often considerable. The indirect nature of this ‘evidence’ cautions against definitive conclusions; nevertheless, the contrast offers little comfort for those who believe that the same model does, more or less, fit all.
Original languageEnglish
Pages (from-to)175-200
Number of pages26
JournalCompetition Policy International
Volume4
Issue number2
Publication statusPublished - 1 Nov 2008

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asymmetry
firm
evidence
merger
European Commission
bill
wisdom
Collusion
Asymmetry
market
Tacit collusion
literature
Mergers
Coordinated effects
Wisdom
Non-cooperative game
Cartels
Empirical model
Stylized facts

Keywords

  • collusion
  • non-cooperative game
  • tacit
  • overt
  • indirect
  • European Commission
  • symmetric

Cite this

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Tacit vs. overt collusion firm asymmetries and numbers : what's the evidence? / Davies, Stephen ; Olczak, Matthew.

In: Competition Policy International, Vol. 4, No. 2, 01.11.2008, p. 175-200.

Research output: Contribution to journalArticle

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