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Sequential Mergers and Delayed Monopolization in Triopoly

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  • Didier Laussel

    (Aix-Marseille Univ.)

Abstract

Under triopoly and Cournot competition, we study an infinite horizon Markov perfect equilibrium merger game in which in each period one of the firms (“the Buyer”) selects a bid price and then the two sellers accept or reject this offer with some probability. The possibility of a “war of attrition” equilibrium in which the seller who outlasts the other is then able to sell in the following period at a greater price, is a distinct feature of the model. Delayed monopolization is all the more likely when the discount factor is small and the ratio duopoly/ triopoly profits is important. Two other equilibria are shown to be possible: an unmerged and an immediate monopolization equilibrium. Each equilibrium is shown to correspond to a different set of parameter values. The two special cases of linear and constant price elastic demand functions are fully characterized.

Suggested Citation

  • Didier Laussel, 2024. "Sequential Mergers and Delayed Monopolization in Triopoly," Dynamic Games and Applications, Springer, vol. 14(1), pages 223-252, March.
    • Handle: RePEc:spr:dyngam:v:14:y:2024:i:1:d:10.1007_s13235-023-00526-7
    DOI: 10.1007/s13235-023-00526-7
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