Equilibrium mergers in a composite industry
AbstractThis industry is formed by single-component producers whose components are combined to create composite goods. When a given firm has the possibility of merging with either a complement or a substitute good producer, its equilibrium choice depends on the degree of product differentiation in the composite good market. A merger between complements, which allows for mixed bundling, only happens when composite goods are very differentiated. Private incentives do not always go along with social interests and the equilibrium merger can differ from the socially optimal merger. After a merger, outsiders have also the opportunity to react and merge to other outsiders or to join the previous merge.
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Bibliographic InfoPaper provided by University of Valencia, ERI-CES in its series Discussion Papers in Economic Behaviour with number 0410.
Date of creation: Jun 2010
Date of revision:
merger; composite goods; substitutes; complements; pricing strategies; countermerger;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-26 (All new papers)
- NEP-COM-2010-06-26 (Industrial Competition)
- NEP-IND-2010-06-26 (Industrial Organization)
- NEP-MIC-2010-06-26 (Microeconomics)
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