CORPORATE RESTRUCTURING IN A COLLUSIVE OLIGOPOLY

Concentration-increasing capital transfers and horizontal mergers are studied in a repeated oligopoly. It is found that these transactions a re more likely to reduce price than traditionally argued. Even horizon tal mergers without synergies may reduce price. Furthermore, a suffici ent condition is found for total welfare to increase. Although this co ndition is difficult to interpret in terms of easy observables, it is weaker, in a large set of circumstances, than traditionally argued. Th ese findings follow from the recognition that-possibly inefficient-par tially collusive arrangements exist before a corporate restructuring. The analysis stresses the nonrobustness of the results in the model wi thout collusion.