Mergers after cartels: How markets react to cartel breakdown

Davies, Stephen, Ormosi, Peter L. and Graffenberger, Martin (2015) Mergers after cartels: How markets react to cartel breakdown. The Journal of Law and Economics, 58 (3). pp. 561-283. ISSN 0022-2186

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Abstract

This paper examines whether cartel breakdown provokes a period of intensive merger activity amongst the former cartelists, designed to re-establish tacit collusion. Using a novel application of recurrent event survival analysis for a pooled sample of 84 European cartels, it finds that mergers are indeed more frequent post-cartel breakdown, especially in markets which are less concentrated. However, it cautions against merely assuming that these mergers are motivated by coordinated effects - alternatively, they may be the consequence of market restructuring, necessitated by more intense competition post-cartel. Further disaggregated analysis of the individual mergers show that on average these mergers are profitable for the acquiring company, and that the tacit collusion motive is likely to be at work for a large minority of the mergers.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
Faculty of Social Sciences > Norwich Business School
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Depositing User: Pure Connector
Date Deposited: 02 Feb 2016 13:03
Last Modified: 22 Oct 2020 23:42
URI: https://ueaeprints.uea.ac.uk/id/eprint/56907
DOI: 10.1086/684227

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