Bilateral merger in a leadership structure
AbstractIn 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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Bibliographic InfoPaper provided by Department of Economics, Keele University in its series Keele Department of Economics Discussion Papers (1995-2001) with number 2001/04.
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).
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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
Web page: http://www.keele.ac.uk/depts/ec/cer/
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Postal: Department of Economics, Keele University, Keele, Staffordshire ST5 5BG - United Kingdom
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- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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