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Conglomerate Mergers and Foreclosure

Author

Listed:
  • Gabrielsen, T.S.

Abstract

The article offers a complementary theory for conglomerate mergers. Conglomerate mergers take place to achieve control over distribution channels that otherwise could be used by rival entrants. An entrant with a very differentiated product is accommodated, and an entrant with a close substitute is foreclosed through a conglomerate merger. There also exist equilibria with partial foreclosure where the entrant is forced onto less efficient distribution channels. Incumbent firms' mergers to achieve foreclosure is socially wasteful.

Suggested Citation

  • Gabrielsen, T.S., 1999. "Conglomerate Mergers and Foreclosure," Norway; Department of Economics, University of Bergen 1899, Department of Economics, University of Bergen.
  • Handle: RePEc:fth:bereco:1899
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    More about this item

    Keywords

    MERGERS ; BUSINESS ORGANIZATION;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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