Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable
Findings in economic theory suggest that horizontal mergers involving firms with aggregate market share less than 50% are unlikely to be motivated by the consequent reduction in competitivity. The results arise because, absent cost efficiencies, quantity-setting firms in small mergers are impoverished by the merger. We demonstrate that this conclusion is a consequence of the strong restrictions imposed on the demand function, and we identify a well-behaved demand function such that any set of merging firms benefits from the reduction in competition even when there are no cost efficiencies.
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Volume (Year): 17 (2000)
Issue (Month): 3 (November)
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- Cheung, Francis K., 1992. "Two remarks on the equilibrium analysis of horizontal merger," Economics Letters, Elsevier, vol. 40(1), pages 119-123, September.
- Joseph Farrell and Carl Shapiro., 1988.
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Economics Working Papers
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799, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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