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
