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Merging with a buyer group member


  • Can Erutku

    (Department of Economics, Glendon College, Toronto, Ont., Canada)

  • Patrick de Lamirande

    (Department of Financial and Information Management, Cape Breton University, Sydney, N. S., Canada)


We examine a merger between a national retailer and a local retailer who is a member of a buyer group. While the traditional literature on mergers assumes an oligopolistic industry (where the merger takes place) supplied by a perfectly competitive one, we assume here that retailers obtain their input from a supplier that can offer quantity discounts. In this setting, a merger can be profitable for insiders (solving the merger paradox) and can also be more profitable for insiders than for outsiders (solving the free-riding problem). This result holds even if the merged firm ends-up with a small share of the market. However, welfare decreases post-merger. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Can Erutku & Patrick de Lamirande, 2009. "Merging with a buyer group member," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 481-490.
  • Handle: RePEc:wly:mgtdec:v:30:y:2009:i:7:p:481-490 DOI: 10.1002/mde.1465

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    References listed on IDEAS

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