Merger Incentives and Inverse Matrices from Bertrand Competition
AbstractThis paper first inverts a general class of matrices for solving Bertrand equilibria from arbitrary coalition structures in linear Bertand oligopolies. It then studies merger incentives and obtains two main results; 1) for any asymmetric costs, mergers of any size are profitable; 2) a merger will reduce outsiders' profits when there are large cost savings or cost asymmetry. The second result is in sharp constrast to Cournot competition where mergers always increase outsiders' profits. This striking new feature not only supports the belief that Bertrand competition is more general than Cournot competition, but will also open up a new line of arguments in future attempts to block merger proposals
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 586.
Date of creation: 11 Aug 2004
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Bertrand Equilibrium; Coalition Structure; Inverse Matrix; Merger Incentives;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
- NEP-COM-2004-08-16 (Industrial Competition)
- NEP-IND-2004-08-31 (Industrial Organization)
- NEP-MIC-2004-08-16 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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