Essay plans

Question 1

Necessary conditions for cartel

Answer 1

-Deviation detectable, punishment sufficient
-Coop > Dev
Characteristics:
-Number of firms
-Size of firms
-Product diff
-Cost symmetry

Question 2

When is a horizontal merger likely to lead to unilateral effects

Answer 2

• Market share of merged firms sufficient
• Product differentiation low enough
• Competitors post merger sufficiently positioned

Question 3

What are indicators of a firm’s market power?

Answer 3

• Market share
• Market concentration
• Barriers to entry
• Buyer power

Question 4

What affects degree of price competition in a market?

Answer 4

• Number of sellers/firms
• Information availability
• Product differentiation

Question 5

What effects can horizontal mergers have on competition?

Answer 5

Anticompetitive:
-Unilateral effects 
-Coordinated effects 
-Removal of brand 
Procompetitive:
-Cost synergies (Norman 2005)
-Reduction products may bring in new competitors

Question 6

Competitive effects of vertical mergers

Answer 6

Anticompetitive:
-Input foreclosure 
-Customer/retailer foreclosure 
-Depends on Input importance, alternatives available
Procompetitive 
-Remove double marginalisation 
-Increase in efficiency 
Argue naturally occur if firms less efficient