The Limits of Monopolization Through Acquisition
AbstractThe authors address the question of whether competitive acquisition of firms by their rivals can result in complete or partial monopolization of a homogeneous product industry. This question is modeled in terms of two distinct three-stage noncooperative games. Analysis of subgame perfect pure strategy Nash equilibria of these games discloses that, under simplifying assumptions, monopolization of an industry through acquisition is limited to industries with relatively few firms. Partial monopolization is either limited in scope or can be completely eliminated by prohibiting any owner from acquiring over 50 percent of the firms in the industry. Copyright 1990, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 754.
Date of creation: Dec 1987
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- Avraham Beja & Israel Zang, 1986. "Internal Pricing and Cost Allocation for Efficient Decentralized Control," Discussion Papers 703, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- McGee, John S, 1980. "Predatory Pricing Revisited," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 289-330, October.
- 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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