Antitrust Economics and Competition Policy

Question 1: Consider two firms producing homogenous goods and choosing prices in each period for an infinite number of periods. Each of the two firms owns a share a of its rival. This share is small enough for each firm to keep full control of its own activities and decisions: the rival is a minority shareholder, who is not represented in the board and receives just a share a of the firm’s profits. Is the likelihood of collusion affected by this cross ownership? Question 2: In a given sector there are n firms that sell directly to consumers. They sell a homogeneous good which is subject to very frequent shocks, giving rise to high price instability. Every week, these firms communicate the price at which they will sell the product in the following week to the central office of their trade association. The trade association then publishes the (following weeks’) prices of all the firms in national newspapers. The national anti-trust authority argues that this practice allows firms to exchange information thereby increasing the likelihood of collusion. Do you agree?