The Ambivalent Role of Punishment in Post-Merger Coordination and the New Approach of the 2010 US Horizontal Merger Guidelines (original) (raw)

Threat of punishment is considered a deterrent force, which ensures the sustainability of post-merger tacit coordination. US and EU Agencies, Courts and economists, including those who extend simulation methods to quantify coordinated effects, assume that parties follow grim trigger strategies: e.g. they choose the collusive output until one firm deviates, and produce the competitive output thereafter. More complex game theory insights indicate that collusion mechanisms can never be as perfect and simple in reality. Punishment plays an ambivalent role in post-merger coordination. More realistic scenarios include long phases of collusion that are