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Bilateral merger in a leadership structure

Author

Listed:
  • Tarun Kabiraj

    (Indian Statistical Institute, Calcutta, India)

  • Arijit Mukherjee

    () (Department of Economics, Keele University, Keele,)

Abstract

In an oligopoly industry of k firms (k > 2) with linear demand and identical (constant) average cost of production, a bilateral merger is never profitable when all firms choose their quantities simultaneously. In this paper we reexamine the issue when some firms have first-mover advantage. We find that in a leader-follower structure a bilateral merger is always profitable when a leader and a follower merge together and the merged firm behaves like a leader. But, a bilateral merger between leaders or between followers may not be privately profitable.

Suggested Citation

  • Tarun Kabiraj & Arijit Mukherjee, 2001. "Bilateral merger in a leadership structure," Keele Department of Economics Discussion Papers (1995-2001) 2001/04, Department of Economics, Keele University.
  • Handle: RePEc:kee:keeldp:2001/04
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/0104.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Follower; Leader; Merger;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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