In an oligopoly industry of k firms (k > 2) with linear demand and identical (constant) average cost of production, a bilateral merger is never profitable when all firms choose their quantities simultaneously. In this paper we reexamine the issue when some firms have first-mover advantage. We find that in a leader-follower structure a bilateral merger is always profitable when a leader and a follower merge together and the merged firm behaves like a leader. But, a bilateral merger between leaders or between followers may not be privately profitable.
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Length: 10 pages Date of creation: Feb 2001 Date of revision: Publication status: Published in Journal of Quantitative Economics, New Series, 1 (Old Series, (2001) 17): 82 - 88 (2003). Handle: RePEc:kee:keeldp:2001/04
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom Phone: +44 (0)1782 584581 Fax: +44 (0)1782 717577 Email: Web page: http://www.keele.ac.uk/depts/ec/cer/ More information through EDIRC
Find related papers by JEL classification: L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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