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Mergers of retailers with limited selling capacity

  • Ramón Faulí-Oller

    ()

    (Universidad de Alicante)

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    We consider two (symmetric) upstream firms producing independent goods that sell to consumers through symmetric retailers. The distinguishing feature of retailers is that they have a selling capacity, in the sense, that there is an upper limit in the total units of the two goods they can sell. For low enough capacity levels, we obtain that wholesale prices are increasing in the capacity and therefore we find cases where profits of retailers increase by restricting capacity. Keeping constant the industry selling capacity, we study the profitability of the merger of all retailers. For low capacity levels we obtain that wholesale prices increase with the merger and therefore the merger of retailers is not profitable.

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2009-26.pdf
    File Function: Fisrt version / Primera version, 2009
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    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2009-26.

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    Length: 18 pages
    Date of creation: Jan 2009
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2009-26
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    1. Cunyat, Antoni & Sloof, Randolph, 2011. "Employee types and endogenous organizational design: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 553-573.
    2. Carlos Oyarzun & Paan Jindapon, 2009. "Strategic truth and deception," Working Papers. Serie AD 2009-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Lilia Maliar & Fernando Valli & Serguei Maliar, 2009. "Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm," Working Papers. Serie AD 2009-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Martin Menner, 2009. "The role for search frictions for output and inflation dynamics: A Bayesian assessment," Working Papers. Serie AD 2009-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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