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
Describe Williamson’s Efficiency Defense graph
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