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On the Price Effects of Horizontal Mergers: A Theoretical Interpretation

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  • Emilie Dargaud
  • Carlo Reggiani

Abstract

The theoretical analysis of merger poses a number of paradoxes. If firms compete in prices, a merger is profitable for all parties involved. Outsiders, however, free-ride and earn higher profits than insiders. The "spokes model" is a recently introduced framework to study n-firms spatial competition. This paper shows that in this model free-riding does not necessarily take place.

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Bibliographic Info

Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 1201.

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Date of creation: 2012
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Handle: RePEc:man:sespap:1201

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  1. McAfee, R Preston & Simons, Joseph J & Williams, Michael A, 1992. "Horizontal Mergers in Spatially Differentiated Noncooperative Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 349-58, December.
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  8. Juan Luis Jiménez & Jordi Perdiguero, 2012. "“Mergers and difference-in-difference estimator: why firms do not increase prices?”," IREA Working Papers 201205, University of Barcelona, Research Institute of Applied Economics, revised Feb 2012.
  9. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  10. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  11. Juan J. Ganuza & Esther Hauk, 2002. "Allocating ideas: Horizontal competition in tournaments," Economics Working Papers 594, Department of Economics and Business, Universitat Pompeu Fabra.
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  13. Fabrizio Germano, 2008. "On commercial media bias," Economics Working Papers 1133, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2009.
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  18. Javier M. López Cuñat & Miguel González-Maestre, 1999. "- Delegation And Mergers In Oligopoly," Working Papers. Serie AD 1999-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  19. Andrea Mantovani & Francisco Ruiz-Aliseda, 2011. "Equilibrium Innovation Ecosystems: The Dark Side of Collaborating with Complementors," Working Papers 11-31, NET Institute.
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  21. Yongmin Chen & Michael H. Riordan, 2003. "Vertical Integration, Exclusive Dealing, and Ex Post Cartelization," Discussion Papers 0203-13, Columbia University, Department of Economics.
  22. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
  23. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  24. George Norman & Lynne Pepall, 1998. "Horizontal Mergers in Spatially Differentiated NonCooperative Markets: a Comment," Discussion Papers Series, Department of Economics, Tufts University 9804, Department of Economics, Tufts University.
  25. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2013. "The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 239-61, February.
  26. Gergely Csorba & Gabor Koltay & David Farkas, 2011. "Separating the ex post effects of mergers: an analysis of structural changes on the Hungarian retail gasoline market," IEHAS Discussion Papers 1118, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  27. Borla, Stefania, 2012. "Spatial competition and merging incentives when firms produce complements," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 221-229.
  28. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
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