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The merger paradox in a mixed oligopoly

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  • Artz, Benjamin
  • Heywood, John S.
  • McGinty, Matthew

Abstract

This paper examines the set of surplus maximizing mergers in a model of mixed oligopoly. The presence of a welfare maximizing public firm reduces the set of mergers for which two private firms can profitably merge. When a public firm and private firm merge, the changes in welfare and profit depend on the resulting extent of private ownership in the newly merged firm. When the government sets that share to maximize post merger welfare as assumed in the privatization literature, the merger paradox will often remain and the merger will not take place. Yet, we show there always exists scope for mergers that increase profit and increase (if not maximize) welfare. Interestingly, these mergers often include complete privatization.

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Bibliographic Info

Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 63 (2009)
Issue (Month): 1 (March)
Pages: 1-10

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Handle: RePEc:eee:reecon:v:63:y:2009:i:1:p:1-10

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Web page: http://www.elsevier.com/locate/inca/622941

Related research

Keywords: Merger paradox Mixed oligopoly Convex costs;

References

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Citations

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Cited by:
  1. Heywood, John S. & McGinty, Matthew, 2011. "Cross-border mergers in a mixed oligopoly," Economic Modelling, Elsevier, vol. 28(1-2), pages 382-389, January.
  2. Sami Debbichi & Walid Hichri, 2014. "Market Power and Collusion on Interconnection Phone Market in Tunisia : What Lessons from International Experiences," Working Papers 1411, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. Sami Debbichi & Walid Hichri, 2013. "Threshold of Preference for Collusion and Interconnection Fees in Different Market Structures : the Tunisian Mobile Market Case," Working Papers 1307, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  4. Bougette, Patrice, 2010. "Preventing merger unilateral effects: A Nash-Cournot approach to asset divestitures," Research in Economics, Elsevier, vol. 64(3), pages 162-174, September.
  5. 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.
  6. Sylvain Kadohognon Ouattara, 2011. "Incitations à fusionner dans un oligopole mixte asymétrique," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201126, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

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