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Merger Profitability in Industries with Brand Portfolios and Loyal Customers

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  • Kai A.Konrad

    (Competition and Tax Law and Social Science Research Center)

Abstract

We study the equilibrium effects of mergers between firms with brand portfolios and brand loyal customers for pricing and profitability. We find that the ��merger paradox�� (Salant, Switzer and Reynolds 1983) is absent in these markets. The acquisition of brand portfolios can be profit enhancing for the merging firms and payoff neutral for the firms not involved in the merger. This may explain the emergence of brand conglomerates such as Richemont, PPR or LVMH.

Suggested Citation

  • Kai A.Konrad, 2010. "Merger Profitability in Industries with Brand Portfolios and Loyal Customers," Korean Economic Review, Korean Economic Association, vol. 26, pages 5-26.
  • Handle: RePEc:kea:keappr:ker-20100630-26-1-01
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    References listed on IDEAS

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    More about this item

    Keywords

    brand portfolios; merger profitability; customer loyalty;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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