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Merger, partial collusion and relocation


  • Posada, Pedro

    () (Department of Economics, University of Warwick)

  • Straume, Odd Rune

    () (University of Bergen, Department of Economica)


We set up a three-firm model of spatial competition to analyse how a merger affects the incentives for relocation, and conversely, how the possibility of relocation affects the profitability of the merger, particularly for the non-participating firm. The analysis is carried out for the assumptions of both mill pricing and price discrimination, and we also consider the case of partial collusion. For the case of mill pricing, a merger will generally induce the merger participants to relocate, but the direction of relocation is ambiguous, and dependent on the degree of convexity in the consumers’ transportation cost function. We also identify a set of parameter values for which the free-rider effect of a merger vanishes, implying that the possibility of relocation could solve the ‘merger paradox’, even in the absence of price discrimination.

Suggested Citation

  • Posada, Pedro & Straume, Odd Rune, 2002. "Merger, partial collusion and relocation," Working Papers in Economics 23/02, University of Bergen, Department of Economics.
  • Handle: RePEc:hhs:bergec:2002_023

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    References listed on IDEAS

    1. Steffan Berridge & Jacek Krawczyk, "undated". "Relaxation Algorithms in Finding Nash Equilibrium," Computing in Economics and Finance 1997 159, Society for Computational Economics.
    2. M.J. Kallio & A. Ruszczynski, 1994. "Perturbation Methods for Saddle Point Computation," Working Papers wp94038, International Institute for Applied Systems Analysis.
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    4. Flam, Sjur & Ruszczynski, A., 2006. "Computing Normalized Equilibria in Convex-Concave Games," Working Papers 2006:9, Lund University, Department of Economics.
    5. Krawczyk, Jacek B., 2005. "Coupled constraint Nash equilibria in environmental games," Resource and Energy Economics, Elsevier, vol. 27(2), pages 157-181, June.
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    Cited by:

    1. Stefano Colombo, 2016. "Mixed oligopolies and collusion," Journal of Economics, Springer, vol. 118(2), pages 167-184, June.
    2. Cosnita-Langlais, Andreea, 2012. "Horizontal market concentration: Theoretical insights from spatial models," Research in Economics, Elsevier, vol. 66(1), pages 22-32.
    3. John Heywood & Guangliang Ye, 2013. "Sequential entry and merger in spatial price discrimination," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 841-859, June.
    4. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, "undated". "Horizontal Mergers and Product Quality," NIPE Working Papers 07/2014, NIPE - Universidade do Minho.
    5. Rasch, Alexander & Wambach, Achim, 2009. "Internal decision-making rules and collusion," Journal of Economic Behavior & Organization, Elsevier, vol. 72(2), pages 703-715, November.
    6. Egger, Hartmut & Egger, Peter, 2010. "The trade and welfare effects of mergers in space," Regional Science and Urban Economics, Elsevier, vol. 40(4), pages 210-220, July.
    7. Stefano Colombo, 2011. "Pricing Policy and Partial Collusion," Journal of Industry, Competition and Trade, Springer, vol. 11(4), pages 325-349, December.
    8. Alain Egli, 2005. "On Stability in Competition: Tying and Horizontal Product Differentiation," Diskussionsschriften dp0501, Universitaet Bern, Departement Volkswirtschaft.
    9. Alexander Rasch, 2012. "A note on mergers and relocation," Journal of Economics, Springer, vol. 107(3), pages 277-282, November.

    More about this item


    Spatial competition; Merger; Relocation; Partial collusion.;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General


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