Mergers of retailers with limited selling capacity
AbstractWe consider two (symmetric) upstream firms producing independent goods that sell to consumers through symmetric retailers. The distinguishing feature of retailers is that they have a selling capacity, in the sense, that there is an upper limit in the total units of the two goods they can sell. For low enough capacity levels, we obtain that wholesale prices are increasing in the capacity and therefore we find cases where profits of retailers increase by restricting capacity. Keeping constant the industry selling capacity, we study the profitability of the merger of all retailers. For low capacity levels we obtain that wholesale prices increase with the merger and therefore the merger of retailers is not profitable.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2009-26.
Length: 18 pages
Date of creation: Jan 2009
Date of revision:
Publication status: Published by Ivie
retailing; mergers; selling capacity;
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
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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