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 InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1699.
Date of creation: 01 Nov 2000
Date of revision:
Publication status: Published in Review of Industrial Organization, November 2000, vol. 17, pp. 277-284
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Other versions of this item:
- David Hennessy, 2000. "Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable," Review of Industrial Organization, Springer, vol. 17(3), pages 277-284, November.
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