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Merger and collusion in contests

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  • Huck, S.
  • Konrad, K.A.
  • Müller, W.

    (Tilburg University)

Abstract

Competition in some product markets takes the form of a contest. If some firms cooperate in such markets, they must decide how to allocate effort on each of their products and whether to reduce the number of their products in the competition. We show how this decision depends on the convexity properties of the contest success function, and we characterize conditions under which cooperation is profitable.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-112517.

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Date of creation: 2002
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Publication status: Published in Journal of Institutional and Theoretical Economics (2002) v.158, p.563-575
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-112517

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Web page: http://www.tilburguniversity.edu/

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References

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  1. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer, vol. 8(2), pages 291-305.
  2. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  3. Schmalensee, Richard, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 493-507, October.
  4. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  5. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  6. Scherer, F.M., 2000. "The pharmaceutical industry," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 25, pages 1297-1336 Elsevier.
  7. Baye, Michael R & Kovenock, Dan & de Vries, Casper G, 1994. " The Solution to the Tullock Rent-Seeking Game When R Is Greater Than 2: Mixed-Strategy Equilibria and Mean Dissipation Rates," Public Choice, Springer, vol. 81(3-4), pages 363-80, December.
  8. Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
  9. Konrad, Kai A., 2000. "Trade contests," Journal of International Economics, Elsevier, vol. 51(2), pages 317-334, August.
  10. Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
  11. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  12. Ohyama, Michihiro, 1997. ""Comments on: Strategic export subsidies and reciprocal trade agreements: The natural monopoly case" by K. Bagwell and R.W. Staiger (Japan and the World Economy 9 (1997) 491-510)," Japan and the World Economy, Elsevier, vol. 9(4), pages 511-513, December.
  13. Mark J. Roberts & Larry Samuelson, 1988. "An Empirical Analysis of Dynamic, Nonprice Competition in an Oligopolistic Industry," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 200-220, Summer.
  14. 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.
  15. Gaudet, Gerard & Salant, Stephen W, 1991. "Increasing the Profits of a Subset of Firms in Oligopoly Models with Strategic Substitutes," American Economic Review, American Economic Association, vol. 81(3), pages 658-65, June.
  16. Nguyen, Dung, 1987. "Advertising, Random Sales Response, and Brand Competition: Some Theoretical and Econometric Implications," The Journal of Business, University of Chicago Press, vol. 60(2), pages 259-79, April.
  17. Schmalensee, Richard, 1992. "Sunk Costs and Market Structure: A Review Article," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 125-34, June.
  18. 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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Citations

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Cited by:
  1. Onderstal, A.M., 2002. "Socially Optimal Mechanisms," Discussion Paper 2002-34, Tilburg University, Center for Economic Research.
  2. Derek Clark & Øystein Foros & Jan Sand, 2011. "Foreclosure in contests," Public Choice, Springer, vol. 148(1), pages 215-232, July.
  3. Steffen Huck & Kai A. Konrad & Wieland Müller, 2005. "Merger without Cost Advantages," CESifo Working Paper Series 1461, CESifo Group Munich.
  4. Konrad, Kai A., 2007. "Strategy in contests: an introduction," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
  5. Matthias Kräkel & Dirk Sliwka, 2002. "Strategic Delegation and Mergers in Oligopolistic Contests," Bonn Econ Discussion Papers bgse2_2002, University of Bonn, Germany.
  6. Martin Grossmann & Helmut Dietl, 2012. "Asymmetric contests with liquidity constraints," Public Choice, Springer, vol. 150(3), pages 691-713, March.

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