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Monopolization through acquisition

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  • Prokop, Jacek

Abstract

This paper considers the possibility of monopolizing a three-firm industry through acquisition of rivals in the absence of the restrictions imposed by the antitrust authorities. The analysis is conducted in two models: a static and a dynamic model of monopolization by a single buyer. In contrast to preceding models, a firm owner is allowed to use mixed strategies in order to decide whether to sell his firm or not. The static model implies that the monopolization through acquisition can be profitable. However, the dynamic formulation of the problem suggests that the expected profits are much smaller, and may not be sufficient to cover any fixed costs associated with the acquisition process. Moreover, the probability of selling the firm by its owner is almost zero, which makes the whole monopolization process extremely unlikely.

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File URL: http://mpra.ub.uni-muenchen.de/43683/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43683.

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Date of creation: 2005
Date of revision: 2006
Handle: RePEc:pra:mprapa:43683

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Related research

Keywords: monopolization; acquisitions; antitrust policy;

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References

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  1. Harris, Ellie G, 1994. "Why One Firm Is the Target and the Other the Bidder in Single-Bidder, Synergistic Takeovers," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 67(2), pages 263-80, April.
  2. Morton I. Kamien & Israel Zang, 1987. "The Limits of Monopolization Through Acquisition," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 754, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 219-27, March.
  4. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, Elsevier, vol. 46(1), pages 1-29, January.
  5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262200716, December.
  6. Kamien, Morton I & Zang, Israel, 1993. "Monopolization by Sequential Acquisition," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 9(2), pages 205-29, October.
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Cited by:
  1. Jacek Prokop, 2009. "Monopolisation of triopoly – revisited," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 1(2), pages 113-125.

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