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

Research output: Working paper

Abstract

The nature of tacitly collusive behaviour often makes coordination unstable, and this may result in periods of breakdown, during which consumers benefit from reduced prices. This is allowed for by adding demand uncertainty to the Compte et al. (2002) model of tacit collusion amongst asymmetric firms. Breakdowns occur when a firm 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
PublisherUniversity of East Anglia
PagesN/A
Number of pages53
DOIs
Publication statusUnpublished - 1 Oct 2010

Publication series

NameWorking papers series
PublisherESRC centre for competition policy
Volume10-3

Keywords

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

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