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On Merger Profitability and the Intensity of Rivalry

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  • Escrihuela-Villar Marc

    () (Departamento de Economia Aplicada, Universitat de les Illes Balears, Edificio Jovellanos Ctra. Valldemossa km 7.5. 07122 Palma de Mallorca, Baleares, Spain)

Abstract

This note considers a general symmetric quantity-setting oligopoly where the “coefficient of cooperation” defined by Cyert and DeGroot (1973, “An Analysis of Cooperation and Learning in a Duopoly Context”. The American Economic Review 63:24–37) is interpreted as the parameter indicating severity of competition. It is obtained that horizontal mergers are more likely to be profitable in a more competitive market structure. Consequently, the results by Salant et al. (1983, “The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium”. The Quarterly Journal of Economics 98 (2):185–99) about merger profitability are sensitive to the assumption of pre-merger Cournot competition.

Suggested Citation

  • Escrihuela-Villar Marc, 2016. "On Merger Profitability and the Intensity of Rivalry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 1203-1212, April.
  • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:2:p:1203-1212:n:21
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    References listed on IDEAS

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    1. Ziss, Steffen, 2001. "Horizontal mergers and delegation," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 471-492, March.
    2. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
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    6. Escrihuela-Villar, Marc, 2008. "Partial coordination and mergers among quantity-setting firms," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 803-810, May.
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    8. Cyert, Richard M & DeGroot, Morris H, 1973. "An Analysis of Cooperation and Learning in a Duopoly Context," American Economic Review, American Economic Association, vol. 63(1), pages 24-37, March.
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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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