Merger wave in a small world: Two views
I attempt a more balanced assessment of mergers in terms of systemic risk versus other effects. First, using the simplest network model, I illustrate how mergers can increase systemic risk by reducing the degree of separation among firms. Then, recasting the firms in a simple economic model that features consumers explicitly, I show how a merger wave – a contagious urge to merge – can occur and what benefit it may bring to consumers. Together, these two models suggest that there is a tradeoff to consider: While a merger wave may result in higher systemic risk, it may also bring about higher consumer welfare.
Volume (Year): 43 (2013)
Issue (Month): C ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/620175|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stefania Vitali & James B. Glattfelder & Stefano Battiston, 2011. "The network of global corporate control," Papers 1107.5728, arXiv.org, revised Sep 2011.
- B. Curtis Eaton & Richard G. Lipsey, 1975.
"The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition,"
Review of Economic Studies,
Oxford University Press, vol. 42(1), pages 27-49.
- B.Curtis Eaton & Richard G. Lipsey, 1972. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Working Papers 87, Queen's University, Department of Economics.
- Scherer, F. M., 2010. "A Perplexed Economist Confronts 'Too Big to Fail'," Working Paper Series rwp10-007, Harvard University, John F. Kennedy School of Government.
- Hay, D A, 1976. "Sequential Entry and Entry-Deterring Strategies in Spatial Competition," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 240-257, July.
- F. M. Scherer, 2010. "A Perplexed Economist Confronts 'too Big to Fail'," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(2), pages 267-284, June.
- Scherer, Frederic Michael, 2010. "A Perplexed Economist Confronts 'Too Big to Fail'," Scholarly Articles 4454151, Harvard Kennedy School of Government.
- Gai, Prasanna & Haldane, Andrew & Kapadia, Sujit, 2011. "Complexity, concentration and contagion," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 453-470. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:43:y:2013:i:c:p:68-71. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.