Partial coordination and mergers among quantity-setting firms

Escrihuela‐Villar, Marc

doi:10.1016/j.ijindorg.2007.06.002

Cited by 18 publications

(13 citation statements)

References 19 publications

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“…Hence, if the discount factor in the implicit dynamic models of collusion is very high, α = 1 is a reasonable parameter for our analysis. A fall in α from 1 corresponds to the case of a lower discount factor, creating partial cooperation (for partial collusion see, e.g., Chang, ; Escrihuela‐Villar, ).…”

Section: Quantity Competitionmentioning

confidence: 99%

Export cartel and consumer welfare

Mukherjee

Sinha

2018

Rev International Economics

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The purpose of this paper is to show that export cartels are not necessarily harmful for consumers in the importing countries. Using a strategic trade policy model, we show that, contrary to the harmful effect, product‐market cooperation benefits consumers by affecting the trade policies. We further show that consumers in the importing countries are affected adversely if cooperation is among the governments of the exporting countries, instead of the exporting firms.

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Section: Quantity Competitionmentioning

confidence: 99%

Export cartel and consumer welfare

Mukherjee

Sinha

2018

Rev International Economics

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“…4 4 Escrihuela‐Villar (2008b) derives some implications of mergers when the cartel is partial, but in that paper, cartel size is exogenous. …”

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confidence: 99%

Endogenous cartel formation with heterogeneous firms

Bos

Harrington

2010

The RAND Journal of Economics

120

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In the context of an infinitely repeated capacity-constrained price game, we endogenize the composition of a cartel when firms are heterogeneous in their capacities. When firms are sufficiently patient, there exists a stable cartel involving the largest firms. A firm with sufficiently small capacity is not a member of any stable cartel. When a cartel is not all-inclusive, colluding firms set a price that serves as an umbrella with non-cartel members pricing below it and producing at capacity. Contrary to previous work, our results suggest that the most severe coordinated effects may come from mergers involving moderate-sized firms, rather than the largest or smallest firms. Copyright (c) 2010, RAND.

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“…As a consequence, there are many SPNE collusive outputs, q , that satisfy the system of inequalities (that can be reduced to one because of firms' symmetry) in Equation that are not necessarily the solution to Equation . Then, as in Verboven () and Escrihuela‐Villar (), we select an equilibrium from this large set assuming that if δ exceeds a certain critical level, the set of SPNE vectors is not a binding constraint, and the distribution of output is the symmetric distribution of the output of a monopolist (the unrestricted joint profit maximizing allocation that is the solution to Equation ). In contrast, if δ is below that critical level, then the set of SPNE vectors is a binding constraint and the distribution of output is the solution to any equality constraint in Equation .…”

Section: The Modelmentioning

confidence: 99%

On the Relationship Between Innovation and Product Market Competition

Escrihuela‐Villar

Guillén

2014

Japanese Economic Review

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of the Balearic Islands and ‡ESAN This paper considers a theoretical model where firms reduce their initial unit costs by spending on R&D activities in a collusive market and where firms are able to coordinate on distinct output levels other than that of the unrestricted joint profit maximization outcome. We show that, in our model, the degree of collusion (captured by the discount factor) reduces the incentive to innovate when innovation is made non-cooperatively. The reason is that non-cooperative R&D introduces a negative externality where firms overinvest beyond the effort required to minimize the cost in order to extract profits from the rival firm, and a reduction in product competition helps internalize the externality. In a research joint venture the absence of R&D rivalry leads to contrary results. The main implication is that the validity of the Schumpeterian hypotheses depends on the extent of cooperation at the R&D stage. JEL Classification Numbers: L11, L52, D43.

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Partial coordination and mergers among quantity-setting firms

Cited by 18 publications

References 19 publications

Export cartel and consumer welfare

Export cartel and consumer welfare

Endogenous cartel formation with heterogeneous firms

On the Relationship Between Innovation and Product Market Competition

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