Convex Costs And The Merger Paradox Revisited
Abstract"Returning to the contention that convex costs provide a resolution to the merger paradox, we show that for reasonable degrees of convexity, the minimum market share needed for merger to be profitable remains close to that associated with linear costs. Moreover, convex costs do not eliminate the free rider problem identified as part of the merger paradox. Finally, we retain convex costs while modeling a firm-by-firm sequential merger process, showing that the paradox constrains a larger share of potential mergers. These findings help reduce the relevance of convex costs as a resolution to the merger paradox." ("JEL" L12, L13) Copyright 2006 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 45 (2007)
Issue (Month): 2 (04)
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Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Luciano Fanti & Nicola Meccheri, 2012.
"Differentiated Duopoly and Horizontal Merger Profitability under Monopoly Central Union and Convex Costs,"
Working Paper Series
05_12, The Rimini Centre for Economic Analysis.
- Luciano Fanti & Nicola Meccheri, 2012. "Differentiated duopoly and horizontal merger profitability under monopoly central union and convex costs," Discussion Papers 2012/134, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- Luciano Fanti & Nicola Meccheri, 2013. "Non-rigid wages and merger profitability reversal under convex costs and centralised unionisation," Discussion Papers 2013/167, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- repec:ebl:ecbull:v:12:y:2007:i:12:p:1-7 is not listed on IDEAS
- Heywood, John S. & McGinty, Matthew, 2011.
"Cross-border mergers in a mixed oligopoly,"
Elsevier, vol. 28(1-2), pages 382-389, January.
- Luciano Fanti & Nicola Meccheri, 2012.
"Profits and competition in a unionized duopoly model with product differentiation and labour decreasing returns,"
2012/133, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- Luciano Fanti & Nicola Meccheri, 2012. "Profits and Competition in a Unionized Duopoly Model with Product Differentiation and Labour Decreasing Returns," Working Paper Series 06_12, The Rimini Centre for Economic Analysis.
- Artz, Benjamin & Heywood, John S. & McGinty, Matthew, 2009. "The merger paradox in a mixed oligopoly," Research in Economics, Elsevier, vol. 63(1), pages 1-10, March.
- Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, vol. 68(2), pages 157-168.
- Gelves, J. Alejandro & Heywood, John S., 2013. "Privatizing by merger: The case of an inefficient public leader," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 69-79.
- Yoshio Kamijo & Yasuhiko Nakamura, 2009. "Stable market structures from merger activities in mixed oligopoly with asymmetric costs," Journal of Economics, Springer, vol. 98(1), pages 1-24, September.
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