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Note on Stable Mergers in a Market with Asymmetric Substitutability

Author

Listed:
  • Takayuki Watanabe

    (Keio University)

  • Nobuo Matsubayashi

    (Keio University)

Abstract

This paper studies the stability of mergers between firms in a Cournot market. Unlike most existing works, we consider a demand structure where the substitutability between firms is asymmetric. We specifically focus on the stability of the grand coalition by analyzing the core allocation. The main result of our analysis shows that the grand coalition becomes stable, as the market is more asymmetric in terms of substitutability.

Suggested Citation

  • Takayuki Watanabe & Nobuo Matsubayashi, 2013. "Note on Stable Mergers in a Market with Asymmetric Substitutability," Economics Bulletin, AccessEcon, vol. 33(3), pages 2024-2033.
    • Handle: RePEc:ebl:ecbull:eb-13-00219
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I3-P190.pdf
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    References listed on IDEAS

    as
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    2. Zhao, Jingang, 1991. "The Equilibria of a Multiple Object Game," International Journal of Game Theory, Springer;Game Theory Society, vol. 20(2), pages 171-182.
    3. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    4. Jingang Zhao, 2001. "The relative interior of the base polyhedron and the core," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 18(3), pages 635-648.
    5. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    6. Aymeric Lardon, 2012. "The γ-core in Cournot oligopoly TU-games with capacity constraints," Theory and Decision, Springer, vol. 72(3), pages 387-411, March.
    7. repec:cor:louvrp:-1276 is not listed on IDEAS
    8. Rajan, Roby, 1989. "Endogenous Coalition Formation in Cooperative Oligopolies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 863-876, November.
    9. Paraskevas V. Lekeas, 2013. "Coalitional Beliefs In Cournot Oligopoly Tu Games," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1-21.
    10. ZHAO, Jingang, 1991. "The equilibria of a multiple objective game," LIDAM Reprints CORE 987, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gabszewicz, Jean J. & Marini, Marco A. & Tarola, Ornella, 2016. "Core existence in vertically differentiated markets," Economics Letters, Elsevier, vol. 149(C), pages 28-32.
    2. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    3. Marco A. Marini, 2018. "Collusive agreements in vertically differentiated markets," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 3, pages 34-56, Edward Elgar Publishing.
    4. Aymeric Lardon, 2019. "On the coalitional stability of monopoly power in differentiated Bertrand and Cournot oligopolies," Theory and Decision, Springer, vol. 87(4), pages 421-449, November.
    5. Takeda, Kohei & Hosoe, Toyoki & Watanabe, Takayuki & Matsubayashi, Nobuo, 2018. "Stability analysis of horizontal mergers in a market with asymmetric substitutability," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 73-84.
    6. Jingang Zhao, 2018. "A Reexamination of the Coase Theorem," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 3(1), pages 111-132, December.

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    More about this item

    Keywords

    Core; Horizontal merger; Cournot oligopoly; Differentiation; Grand coalition;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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