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Merger, Partial Collusion and Relocation

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  • Pedro Posada

    ()

  • Odd Rune Straume

    ()

Abstract

We 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 Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 83 (2004)
Issue (Month): 3 (December)
Pages: 243-265

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Handle: RePEc:kap:jeczfn:v:83:y:2004:i:3:p:243-265

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Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: spatial competition; merger; relocation; partial collusion; L13; L41; R30;

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Cited by:
  1. Alain Egli, 2005. "On Stability in Competition: Tying and Horizontal Product Differentiation," Diskussionsschriften, Universitaet Bern, Departement Volkswirtschaft dp0501, Universitaet Bern, Departement Volkswirtschaft.
  2. John Heywood & Guangliang Ye, 2013. "Sequential entry and merger in spatial price discrimination," The Annals of Regional Science, Springer, Springer, vol. 50(3), pages 841-859, June.
  3. Hartmut Egger & Peter Egger, 2008. "The Trade and Welfare Effects of Mergers in Space," CESifo Working Paper Series 2217, CESifo Group Munich.
  4. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2014. "Horizontal Mergers and Product Quality-," Discussion Paper Series in Economics 4/2014, Department of Economics, Norwegian School of Economics.
  5. Steffen Huck & Kai A. Konrad & Wieland Müller, 2005. "Merger without Cost Advantages," CESifo Working Paper Series 1461, CESifo Group Munich.
  6. Andreea Cosnita-Langlais, 2008. "Horizontal market concentration: Theoretical insights from the spatial models," EconomiX Working Papers 2008-42, University of Paris West - Nanterre la Défense, EconomiX.
  7. Stefano Colombo, 2011. "Pricing Policy and Partial Collusion," Journal of Industry, Competition and Trade, Springer, vol. 11(4), pages 325-349, December.
  8. Alexander Rasch, 2012. "A note on mergers and relocation," Journal of Economics, Springer, Springer, vol. 107(3), pages 277-282, November.
  9. Rasch, Alexander & Wambach, Achim, 2009. "Internal decision-making rules and collusion," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 703-715, November.

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