Thursday, November 29, 2007
Posted by D. Daniel Sokol
An interesting new paper comes from Stephen Davies and Matt Olczak, both of the University of East Anglia Competition Law Centre, titled Tacit Collusion, Firm Asymmetries and Numbers: Evidence from EC Merger Cases.
ABSTRACT: The purpose of this paper is to identify empirically the implicit structural model, especially the roles of size asymmetries and concentration, used by the European Commission to identify mergers with coordinated effects (i.e. collective dominance). Apart from its obvious policy-relevance, the paper is designed to shed empirical light on the conditions under which tacit collusion is most likely. We construct a database relating to 62 candidate mergers and find that, in the eyes of the Commission, tacit collusion in this context virtually never involves more than two firms and requires close symmetry in the market shares of the two firms.