Lecture 13 Flashcards
Why do collusions fail?
Prisonna Dilemma
- Each firm has unilateral incentive to expand output
How does a collusion (or Cartel) work?
- Restrain output below normal
- Agree on a price
- Firms involved earn monopoly-level profits
Where is the equilibrium for firms that collude?
At “N” where both firms undercut.
Undercutting is considered a _______ strategy when M < M +D, D > 0, N > 0
Dominant
What is a merger?
When two or more firms are combined into a single entity
What are 3 types of mergers?
Horizontal
Vertical
Conglomerative
What is a merger of firms in the same industry?
Horizontal
What is a merger of firms along the supply chain?
Vertical
A firm buying a distributor is a ______ integration
Forward
A firm buying a supplier is a ______ integration
Backward
What is the benefit of a conglomerative merger?
Risk diversification
What are 2 actions the competition tribunal can take against mergers?
- block perspective mergers / dissolve them afterwards
- force merged firms to dispose of some assets
Under what circumstances will the tribunal bureau dissolve mergers?
Cost to customers > Gains in efficiency
List types of mergers in order of interest to the competition authorities
Horizontal > Vertical > Conglomerate
What forms of deceptive practices exist for the Competition Bureau?
Misleading Advertising
Deceptive Marketing
Deceptive practices lead to _________ _________
Pareto Inefficiency (Asymmetric Information)
Deceptive practices is bad from a ______ view
Utilitarian
Also violates all the ethical rules
Describe Williamson’s Efficiency Defense graph
Search up
criminal law vs civil law standard of proof?
Criminal law - beyond shadow of a doubt
civil law- 80% probability of guilt
criminal code violations
fine + prison
civil code violations
fines up to 10m
difference between merger and collusion?
merger is legal / can bring efficiency gains
when would a commissioner challenge merger?
- if combined firm is over 35% of market power
- if post merger market share of four largest firms is over 65%
when are pre merger notifications required?
value of target film over 93m
combined value of firm over 400m
what is input foreclosure
disadvantage downstream rivals’ supply of inputs.
what is Customer foreclosure
disadvantage upstream rivals in the distribution/resale of their products.
