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The merger paradox in a mixed oligopoly

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  • Artz, Benjamin
  • Heywood, John S.
  • McGinty, Matthew

Abstract

This paper examines the set of surplus maximizing mergers in a model of mixed oligopoly. The presence of a welfare maximizing public firm reduces the set of mergers for which two private firms can profitably merge. When a public firm and private firm merge, the changes in welfare and profit depend on the resulting extent of private ownership in the newly merged firm. When the government sets that share to maximize post merger welfare as assumed in the privatization literature, the merger paradox will often remain and the merger will not take place. Yet, we show there always exists scope for mergers that increase profit and increase (if not maximize) welfare. Interestingly, these mergers often include complete privatization.

Suggested Citation

  • Artz, Benjamin & Heywood, John S. & McGinty, Matthew, 2009. "The merger paradox in a mixed oligopoly," Research in Economics, Elsevier, vol. 63(1), pages 1-10, March.
    • Handle: RePEc:eee:reecon:v:63:y:2009:i:1:p:1-10
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    10. Kadohognon Sylvain Ouattara, 2015. "Incentives to merge in asymmetric mixed oligopoly," Economics Bulletin, AccessEcon, vol. 35(2), pages 885-895.
    11. Bárcena-Ruiz, Juan Carlos & Garzón, María Begoña, 2020. "Mergers between local public firms," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
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    17. Ohnishi, Kazuhiro, 2020. "Price-setting mixed duopoly, partial privatisation and subsidisation," MPRA Paper 104063, University Library of Munich, Germany.
    18. Ohnishi, Kazuhiro, 2019. "Capacity choice in an international mixed triopoly," MPRA Paper 94051, University Library of Munich, Germany.
    19. Ohnishi, Kazuhiro, 2021. "Pollution, partial privatization and the effect of ambient charges," MPRA Paper 106319, University Library of Munich, Germany.
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