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Post-merger internal organization in multitier decentralized supply chains

Author

Listed:
  • Margarida Catalão-Lopes

    (Universidade de Lisboa)

  • Duarte Brito

    (Universidade Nova de Lisboa and CEFAGE-UE)

Abstract

This paper analyses the effects upon firms and consumers of horizontal mergers in a multitier decentralized supply chain with a finite number of players in each tier, when firms may opt for two different post-merger internal organization forms: multidivisional, in which separate divisions are kept, or traditional, with cost synergies. To this effect, we develop and solve a formal game theory-based Cournot model. The main results are: independently of the tier in which the merger takes place, higher synergies do not always lead to higher consumer welfare; despite the fact that the proposal of a traditional merger reveals significant cost savings consumer welfare may still decrease with the merger; traditional downstream mergers tend to be more profitable than traditional upstream ones; multidivisional mergers are always profitable.

Suggested Citation

  • Margarida Catalão-Lopes & Duarte Brito, 2021. "Post-merger internal organization in multitier decentralized supply chains," Journal of Economics, Springer, vol. 132(3), pages 251-289, April.
    • Handle: RePEc:kap:jeczfn:v:132:y:2021:i:3:d:10.1007_s00712-020-00723-7
    DOI: 10.1007/s00712-020-00723-7
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    References listed on IDEAS

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    1. Leonard F. S. Wang & Han Wang, 2021. "Will managerial delegation impede upstream collusion?," Journal of Economics, Springer, vol. 134(2), pages 127-146, October.

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    More about this item

    Keywords

    Mergers; Multidivisional firms; Cost savings; Supply chain;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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