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Competition in successive markets : entry and mergers

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  • GABSZEWICZ, Jean J.
  • ZANAJ, Skerdilajda

Abstract

This paper analyses successive markets where the intra-market linkage depends on the technology used to produce the final output. We investigate entry of new firms, when entry obtains by expanding the economy, as well as collusive agreements between firms. We highlight the differentiated effects of entry corresponding to a constant or decreasing returns technology. In particular, we show that, under decreasing returns, free entry in both markets does not entail the usual tendency for the input price to adjust to its marginal cost while it does under constant returns. Then, we analyse collusive agreements by stressing the role of upstream linkage on the profitability of horizontal mergers A la Salant, Switzer and Reynolds.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006097.

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Date of creation: 00 Nov 2006
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Handle: RePEc:cor:louvco:2006097

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Related research

Keywords: oligopoly; entry; horizontal collusion; foreclosure;

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References

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  1. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
  2. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May.
  3. Gérard Gaudet & Ngo Van Long, 1995. "Vertical Integration, Foreclosure and Profits in the Presence of Double Marginalisation," CIRANO Working Papers 95s-40, CIRANO.
  4. HANSEN, Terje & JASKOLD GABSZEWICZ, Jean, . "Collusion of factor owners and distribution of social output," CORE Discussion Papers RP -101, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March.
  6. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
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Cited by:
  1. Maria Eugenia, SANIN & Skerdilajda, ZANAJ, 2007. "Environmental innovation under Cournot competition," Discussion Papers (ECON - Département des Sciences Economiques) 2007031, Université catholique de Louvain, Département des Sciences Economiques.
  2. Jean Gabszewicz & Didier Laussel & Tanguy Van Ypersele & Skerdilajda Zanaj, 2008. "Market games and successive oligopolies," CREA Discussion Paper Series 08-05, Center for Research in Economic Analysis, University of Luxembourg.
  3. GABSZEWICZ, Jean J. & ZANAJ, Skerdilajda, 2007. "A note on successive oligopolies and vertical mergers," CORE Discussion Papers 2007074, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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