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Spatial market expansion through mergers

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Abstract

In this paper we present a model that studies firm mergers in a spatial setting. A new model is formulated that addresses the issue of finding the number of branches that have to be eliminated by a firm after merging with another one, in order to maximize profits. The model is then applied to an example of bank mergers in the city of Barcelona. Finally, a variant of the formulation that introduces competition is presented together with some conclusions.

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  • Verónica Durán-Carbó & Charles ReVelle & Daniel Serra, 2006. "Spatial market expansion through mergers," Economics Working Papers 960, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:960
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    1. James V. Jucker & Robert C. Carlson, 1976. "The Simple Plant-Location Problem under Uncertainty," Operations Research, INFORMS, vol. 24(6), pages 1045-1055, December.
    2. Daniel Serra & Rosa Colomé, 1998. "Consumer choice in competitive location models: Formulations and heuristics," Economics Working Papers 290, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Houston, Joel F. & James, Christopher M. & Ryngaert, Michael D., 2001. "Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 285-331, May.
    4. D Serra & H A Eiselt & G Laporte & C S ReVelle, 1999. "Market Capture Models under Various Customer-Choice Rules," Environment and Planning B, , vol. 26(5), pages 741-750, October.
    5. Avery, Robert B. & Bostic, Raphael W. & Calem, Paul S. & Canner, Glenn B., 1999. "Consolidation and bank branching patterns," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 497-532, February.
    6. Daniel Serra & Charles Revelle, 1997. "Competitive location and pricing on networks," Economics Working Papers 219, Department of Economics and Business, Universitat Pompeu Fabra.
    7. Pilloff, Steven J, 1996. "Performance Changes and Shareholder Wealth Creation Associated with Mergers of Publicly Traded Banking Institutions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 294-310, August.
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    More about this item

    Keywords

    Mergers; facility location; spatial competition;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General

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