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On the Price Effects of Horizontal Mergers: A Theoretical Interpretation

  • Emilie Dargaud
  • Carlo Reggiani

The theoretical analysis of merger poses a number of paradoxes. If firms compete in prices, a merger is profitable for all parties involved. Outsiders, however, free-ride and earn higher profits than insiders. The "spokes model" is a recently introduced framework to study n-firms spatial competition. This paper shows that in this model free-riding does not necessarily take place.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/economics/discussionpapers/EDP-1201.pdf
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Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 1201.

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Date of creation: 2012
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Handle: RePEc:man:sespap:1201
Contact details of provider: Postal: Manchester M13 9PL
Phone: (0)161 275 4868
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Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/

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  1. McAfee, R Preston & Simons, Joseph J & Williams, Michael A, 1992. "Horizontal Mergers in Spatially Differentiated Noncooperative Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 349-58, December.
  2. Ramon Caminal & Lluís M. Granero, 2008. "Multi-product Firms and Product Variety," UFAE and IAE Working Papers 734.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. A. Mantovani & F. Ruiz-Aliseda, 2012. "Equilibrium Innovation Ecosystems: The Dark Side of Collaborating with Complementors," Working Papers wp825, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2011. "The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool," NBER Working Papers 17476, National Bureau of Economic Research, Inc.
  5. Matthew Weinberg, 2007. "The Price Effects of Horizontal Mergers: A Survey," Working Papers 62, Princeton University, Department of Economics, Center for Economic Policy Studies..
  6. John Simpson & Christopher Taylor, 2008. "Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 135-152, 02.
  7. Javier M. López Cuñat & Miguel González-Maestre, 1999. "- Delegation And Mergers In Oligopoly," Working Papers. Serie AD 1999-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
  9. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  10. Fabrizio Germano, 2008. "On commercial media bias," Economics Working Papers 1133, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2009.
  11. Caminal, Ramon, 2010. "Markets and linguistic diversity," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 774-790, December.
  12. Whinston, Michael D., 2007. "Antitrust Policy toward Horizontal Mergers," Handbook of Industrial Organization, Elsevier.
  13. Borla, Stefania, 2012. "Spatial competition and merging incentives when firms produce complements," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 221-229.
  14. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
  15. Juan-José Ganuza & Esther Hauk, 2006. "Allocating Ideas: Horizontal Competition in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 763-787, 09.
  16. George Norman & Lynne Pepall, 1998. "Horizontal Mergers in Spatially Differentiated NonCooperative Markets: a Comment," Discussion Papers Series, Department of Economics, Tufts University 9804, Department of Economics, Tufts University.
  17. Juan Luis Jiménez & Jordi Perdiguero, 2012. "“Mergers and difference-in-difference estimator: why firms do not increase prices?”," IREA Working Papers 201205, University of Barcelona, Research Institute of Applied Economics, revised Feb 2012.
  18. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  19. Jonathan Vogel, 2008. "Spatial Competition with Heterogeneous Firms," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 423-466, 06.
  20. Pilar Socorro, M., 2004. "Mergers and the importance of fitting well," Economics Letters, Elsevier, vol. 82(2), pages 269-274, February.
  21. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  22. Gergely Csorba & Gabor Koltay & David Farkas, 2011. "Separating the ex post effects of mergers: an analysis of structural changes on the Hungarian retail gasoline market," IEHAS Discussion Papers 1118, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  23. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," CPI Journal, Competition Policy International, vol. 5.
  24. Michael H. Riordan & Yongmin Chen, 2005. "Price and Variety in the Spokes Model," Discussion Papers 0405-20, Columbia University, Department of Economics.
  25. Ramón Caminal & Adina Claici, 2005. "Are loyalty-rewarding pricing schemes anti-competitive?," Working Papers 228, Barcelona Graduate School of Economics.
  26. Brito, Duarte, 2003. "Preemptive mergers under spatial competition," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1601-1622, December.
  27. Barros, Pedro Pita, 1998. "Endogenous mergers and size asymmetry of merger participants," Economics Letters, Elsevier, vol. 60(1), pages 113-119, July.
  28. Yongmin Chen & Michael H. Riordan, 2003. "Vertical Integration, Exclusive Dealing, and Ex Post Cartelization," Discussion Papers 0203-13, Columbia University, Department of Economics.
  29. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  30. Marco Alderighi & Claudio A. Piga, 2012. "Localized Competition, Heterogeneous Firms and Vertical Relations," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 46-74, 03.
  31. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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