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Merger Without Costs Advantage

Author

Listed:
  • Huck, S.
  • Konrad, K.A.
  • Müller, W.

    (Tilburg University, TILEC)

Abstract

The seminal paper by Salant, Switzer and Reynolds (1983) showed that merger in a standard Cournot framework with linear demand and linear costs is not profitable unless a large majority of the firms are involved in the merger. However, many strategic aspects matter for firm competition such as the internal organization of the firm, the time structure of decision making, information aspects of competition, or the imbeddedness of firm competition in a strategic trade competition game between governments. This survey will reveal that the puzzle as in Salant, Switzer and Reynolds (1983) may be resolved without recurring to cost savings of merger. Firms interact with each other, with customers, suppliers, their owners, and with governments in many different ways, and inspection of these types of interaction reveals a multiplicity of reasons why merger can be profitable for the merging firms, even in Cournot markets with linear demand and cost.
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Suggested Citation

  • Huck, S. & Konrad, K.A. & Müller, W., 2005. "Merger Without Costs Advantage," Discussion Paper 2005-019, Tilburg University, Tilburg Law and Economic Center.
    • Handle: RePEc:tiu:tiutil:7769039c-6d8e-433c-b88a-4fcbcc4b53c3
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    File URL: https://pure.uvt.nl/ws/portalfiles/portal/776032/2005-019.pdf
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    Cited by:

    1. Gamal Atallah, 2015. "Multi-Firm Mergers with Leaders and Followers," Working Papers E1501E, University of Ottawa, Department of Economics.
    2. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    3. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers 731, Stockholm University, Institute for International Economic Studies.
    4. Andreas Haufler & Søren Bo Nielsen, 2008. "Merger policy to promote 'global players'? A simple model," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 517-545, July.
    5. Simon Cowan, 2024. "The profitability of mergers in symmetric Cournot oligopoly," Economics Series Working Papers 1041, University of Oxford, Department of Economics.

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