Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable
AbstractFindings in economic theory suggest that horizontal mergers involving firms with aggregate market share less than 50% are unlikely to be motivated by the consequent reduction in competitivity. The results arise because, absent cost efficiencies, quantity-setting firms in small mergers are impoverished by the merger. We demonstrate that this conclusion is a consequence of the strong restrictions imposed on the demand function, and we identify a well-behaved demand function such that any set of merging firms benefits from the reduction in competition even when there are no cost efficiencies.
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Bibliographic InfoArticle provided by Springer in its journal Review of Industrial Organization.
Volume (Year): 17 (2000)
Issue (Month): 3 (November)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100336
Demand function; endogenous merger; equilibrium; market power;
Other versions of this item:
- 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.
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