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Monopolisation of triopoly – revisited

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  • Jacek Prokop

Abstract

The main objective of this paper is to provide a new insight into the possibility of monopolising a three-firm industry through acquisition of rivals in the absence of restrictions imposed by the antitrust authorities. The dynamic model of monopolisation under Cournot-type rivalry among oligopolists implies that the monopolisation through acquisition is not profitable because of the free riding among the owners of firms. However, in a model of triopoly where the acquirer could become the market leader of the Stackelberg type, we show that a single buyer can monopolise an industry through acquisition of rivals. It means that the monopolisation of triopoly may not be prevented by the market alone. This finding has an important regulatory implication different from the results of the previous models: an active intervention of antitrust authorities in the market with only three firms is necessary to block mergers and acquisitions.

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Bibliographic Info

Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Computational Economics and Econometrics.

Volume (Year): 1 (2009)
Issue (Month): 2 ()
Pages: 113-125

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Handle: RePEc:ids:ijcome:v:1:y:2009:i:2:p:113-125

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Web page: http://www.inderscience.com/browse/index.php?journalID==311

Related research

Keywords: triopoly monopolisation; mergers; acquisitions; free riding; antitrust policy; computational economics; dynamic modelling; rivalry; regulations.;

References

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  1. Kamien, Morton I & Zang, Israel, 1990. "The Limits of Monopolization through Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 465-99, May.
  2. Hennessy, David A., 2000. "Cournot Oligopoly Conditions Under Which Any Horizontal Merger is Profitable," Staff General Research Papers 1699, Iowa State University, Department of Economics.
  3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
  4. Kamien, Morton I & Zang, Israel, 1993. "Monopolization by Sequential Acquisition," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 205-29, October.
  5. Mihkel M. Tombak, 2002. "Mergers to Monopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 513-546, 09.
  6. Harris, Ellie G, 1994. "Why One Firm Is the Target and the Other the Bidder in Single-Bidder, Synergistic Takeovers," The Journal of Business, University of Chicago Press, vol. 67(2), pages 263-80, April.
  7. Prokop, Jacek, 2005. "Monopolization through acquisition," MPRA Paper 43683, University Library of Munich, Germany, revised 2006.
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