Acquisitions versus Entry: The Evolution of Concentration
We consider market dynamics in a reduced form model. In the simplest version, there are two investors and several small noninvesting firms. In each period, one investor can acquire a small firm, the other investor decides about market entry. After that all firms play an oligopoly game. We derive conditions under which increasing market concentration arises with myopic firms, we show that a model with forward-looking firms and with arbitrary numbers of investors yield similar results. We apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm.
|Date of creation:||Aug 2002|
|Date of revision:||Aug 2002|
|Publication status:||Published in Journal of Economic Behavior and Organization, 2008, 65(1), 133-146|
|Contact details of provider:|| Postal: |
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.soi.uzh.ch/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nilssen, T. & Sorgard, L., 1995.
"Sequential Horizontal Mergers,"
30/1995, Oslo University, Department of Economics.
- Stavins, Joanna, 1995. "Model Entry and Exit in a Differentiated-Product Industry: The Personal Computer Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 571-84, November.
- Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
- Flaherty, M Therese, 1980. "Industry Structure and Cost-Reducing Investment," Econometrica, Econometric Society, vol. 48(5), pages 1187-1209, July.
- Beggs, Alan W & Klemperer, Paul, 1992.
"Multi-period Competition with Switching Costs,"
Econometric Society, vol. 60(3), pages 651-66, May.
- Luis Cabral, 2000.
"Increasing Dominance With No Efficiency Effect,"
00-06, New York University, Leonard N. Stern School of Business, Department of Economics.
- Cabral, L., 2000. "Increasing Dominance with No Efficiency Effect," New York University, Leonard N. Stern School Finance Department Working Paper Seires 00-06, New York University, Leonard N. Stern School of Business-.
- Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
- Ravenscraft, David J. & Scherer, F. M., 1989. "The profitability of mergers," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 101-116, March.
- Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
When requesting a correction, please mention this item's handle: RePEc:soz:wpaper:0208. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser)
If references are entirely missing, you can add them using this form.