Merger, Partial Collusion and Relocation
AbstractWe set up a three-firm model of spatial competition to analyse how a merger affects the incentives for relocation, and conversely, how the possibility of relocation affects the profitability of the merger, particularly for the non-participating firm. We also consider the cases of partial collusion in either prices or locations. Under the assumption of mill pricing, we find that a merger will generally induce the merger participants to relocate, but the direction of relocation is ambiguous, and dependent on the degree of convexity in the consumers’ transportation cost function. Furthermore, we identify a set of parameter values for which the free-rider effect of a merger vanishes, implying that the possibility of relocation could solve the “merger paradox”. Copyright Springer-Verlag Wien 2004
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economics.
Volume (Year): 83 (2004)
Issue (Month): 3 (December)
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Web page: http://www.springerlink.com/link.asp?id=108909
spatial competition; merger; relocation; partial collusion; L13; L41; R30;
Other versions of this item:
- Posada, Pedro & Odd Rune Straume, 2003. "Merger, partial collusion and relocation," Royal Economic Society Annual Conference 2003 167, Royal Economic Society.
- Posada, Pedro & Straume, Odd Rune, 2002. "Merger, partial collusion and relocation," Working Papers in Economics 23/02, University of Bergen, Department of Economics.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
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