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The consequences of endogenous timing for diversification strategies of multimarket firms

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  • Neubauer, Silke
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    Abstract

    When firms diversify into new markets in spite of the existence of diseconomies of scope, not only firms' profits are affected, but also potential welfare is reduced. Nevertheless, multimarket competition is the outcome of a game when players move simultaneously. A Cournot model is developped where players can choose the timing of their action before deciding over quantities. This helps firms to avoid the inefficiencies that ocur with multimarket competition. Whenever the timing game has an impact on the outcome of the basic game, the consequences for welfare are positive. -- Die Diversifikation von Unternehmen in neue Märkte führt zu Effizienzverlusten und Gewinneinbußen, wenn dadurch Spezialisierungsvorteile nicht mehr genutzt werden können. Dennoch ist Diversifikation das Ergebnis eines simultanen Cournotspiels, in welchem sich zwei Unternehmen auf zwei Märkten als potentielle Wettbewerber gegenüberstehen. Die Einführung einer Vorstufe zum Cournotspiel, in welcher Unternehmen den Zeitpunkt ihrer Angebotsentscheidung in beiden Märkten wählen können, kann einen Teil dieser Ineffizienzen beseitigen. Unternehmen konzentrieren sich auf je einen Markt. Wegen der Existenz potentieller Konkurrenz sind die Wohlfahrtswirkungen trotz der resultierenden monopolistischen Marktstruktur im Vergleich zum Ausgangsspiel positiv.

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    Bibliographic Info

    Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, various Research Units with number FS IV 97-34.

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    Date of creation: 1997
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    Handle: RePEc:zbw:wzbdiv:fsiv9734

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    1. Dixon, Huw David, 1992. "Inefficient Diversification in Multimarket Oligopoly with Diseconomies of Scope," CEPR Discussion Papers 732, C.E.P.R. Discussion Papers.
    2. Boyer, Marcel & Moreaux, Michel, 1987. "Being a leader or a follower: Reflections on the distribution of roles in duopoly," International Journal of Industrial Organization, Elsevier, vol. 5(2), pages 175-192.
    3. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-74, May.
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    Cited by:
    1. Neubauer, Silke, 1997. "Interdivisional information sharing: the strategic advantage of knowing nothing," Discussion Papers, Research Unit: Market Dynamics FS IV 97-33, Social Science Research Center Berlin (WZB).

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