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Strategic Contracts Versus Multiple Plants: Location Under Sequential Entry




In this paper we explore the concept of a 'strategic contract' between two of three entrants that arrive sequentially in a spatial market and practise discriminatory pricing. We compare our results with those arising when two firms merge to create two plants. Although this second problem is superficially similar to the first, the underlying behavior and implications differ in crucial respects. The consequences, in terms of a variety of measures of welfare, of all of our results are demonstrated. We also consider the implications of the results for the so-called 'merger paradox'. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd and The University of Manchester.

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  • R. Rothschild & John S. Heywood & Kristen Monaco, 2007. "Strategic Contracts Versus Multiple Plants: Location Under Sequential Entry," Manchester School, University of Manchester, vol. 75(2), pages 237-257, March.
  • Handle: RePEc:bla:manchs:v:75:y:2007:i:2:p:237-257

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    References listed on IDEAS

    1. Paul Gompers & Josh Lerner, 2000. "The Determinants of Corporate Venture Capital Success: Organizational Structure, Incentives, and Complementarities," NBER Chapters,in: Concentrated Corporate Ownership, pages 17-54 National Bureau of Economic Research, Inc.
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    Cited by:

    1. John Heywood & Guangliang Ye, 2013. "Sequential entry and merger in spatial price discrimination," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 841-859, June.
    2. Kress, Dominik & Pesch, Erwin, 2012. "Sequential competitive location on networks," European Journal of Operational Research, Elsevier, vol. 217(3), pages 483-499.

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