Unilateral versus coordinated effects: comparing the impact on consumer welfare of alternative merger outcomes

Research output: Contribution to conferencePaper

Abstract

The nature of tacitly collusive behaviour often makes coordination unstable, and this may result in periods of breakdown, during which consumers benet from reduced prices. This is allowed for by adding demand uncertainty to the Compte et al. (2002) model of tacit collusion amongst asymmetric rms. Breakdowns occur when a rm cannot exclude the possibility of a deviation by a rival. It is then possible that an outcome with collusive behaviour, subject to long/frequent break downs, can improve consumer welfare compared to an alternative with sustained unilateral conduct. This is illustrated by re-examining the Nestle/Perrier merger analyzed by Compte et al., but now also taking into account the potential for welfare losses arising from unilateral behaviour.
Original languageEnglish
Number of pages51
Publication statusPublished - Oct 2010
Event8th international industrial organization conference - Vancouver, Canada
Duration: 14 May 201016 May 2010

Conference

Conference8th international industrial organization conference
CountryCanada
CityVancouver
Period14/05/1016/05/10

Keywords

  • tacit collusion
  • collective dominance
  • coordinated effects
  • unilateral effects
  • merger policy

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