Horizontal Mergers with Scale Economies
We examine the profitability and social efficiency of horizontal mergers in a Cournot oligopoly with decreasing average costs. Assuming the merger allows for a reduction in the total amount of fixed costs, we identify the conditions under which the merger is, respectively, profitable and socially desirable. There exists an admissible parameter range wherein the merger is socially convenient but not profitable. In such a case, the policy maker may induce firms to merge through subsidies financed via a lump sum tax.
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- Farrell, Joseph & Shapiro, Carl, 2000.
"Scale Economies and Synergies in Horizontal Merger Analysis,"
Competition Policy Center, Working Paper Series
qt8v1500b8, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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"Horizontal Mergers: An Equilibrium Analysis,"
Department of Economics, Working Paper Series
qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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Springer, vol. 17(3), pages 277-284, November.
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